In a significant blow to President Donald Trump’s trade agenda, a U.S. federal trade court has blocked his sweeping “Liberation Day” tariffs, ruling that the president overstepped his legal authority by imposing broad import duties without congressional approval. The decision, handed down on May 28, 2025, by a three-judge panel at the U.S. Court of International Trade in Manhattan, marks a pivotal moment in the ongoing legal and economic battles surrounding Trump’s trade policies. Despite the ruling, a federal appeals court temporarily reinstated the tariffs the following day, creating uncertainty for businesses, consumers, and global markets.
What Are the Liberation Day Tariffs?
On April 2, 2025, President Trump announced his “Liberation Day” tariffs, describing them as a “declaration of economic independence” for the United States. These tariffs included a 10% baseline duty on nearly all imports, with higher rates—up to 30% for China and 25% for some goods from Mexico and Canada—targeting countries with significant trade surpluses with the U.S. Trump justified the tariffs by invoking the International Emergency Economic Powers Act (IEEPA), claiming that the U.S. trade deficit constituted a national emergency. Additional tariffs were also imposed on China, Mexico, and Canada to address issues like illegal immigration and fentanyl trafficking.
The tariffs were intended to pressure foreign nations into negotiating trade deals favorable to the U.S. and to encourage manufacturers to relocate factories to American soil. However, they sparked immediate controversy, sending global stock markets into a tailspin and raising concerns about inflation and supply chain disruptions. Small businesses, in particular, reported severe financial strain, with some facing potential bankruptcy due to the increased costs of imported goods.
The Court’s Ruling: A Legal Setback
The U.S. Court of International Trade’s ruling came in response to two major lawsuits. One was filed by the Liberty Justice Center on behalf of five small U.S. businesses, including a New York wine importer and a Virginia-based educational toy manufacturer, which argued that the tariffs were devastating their operations. The other lawsuit was brought by a coalition of 12 U.S. states, led by Oregon’s Attorney General Dan Rayfield, who called the tariffs “unlawful, reckless, and economically devastating.”
The court’s decision hinged on the interpretation of the IEEPA, a 1977 law that grants the president broad economic powers during a national emergency. The judges ruled that the IEEPA does not authorize the president to impose sweeping tariffs, as the Constitution grants Congress exclusive authority to regulate international commerce. “The court does not read IEEPA to confer such unbounded authority and sets aside the challenged tariffs imposed thereunder,” the panel wrote. The ruling also invalidated separate tariffs on China, Mexico, and Canada, finding that they did not directly address the cited emergencies, such as drug trafficking.
The court issued a permanent injunction, ordering the Trump administration to halt the tariffs within 10 days. However, the administration swiftly appealed, and on May 29, 2025, the U.S. Court of Appeals for the Federal Circuit granted a temporary stay, reinstating the tariffs while legal proceedings continue. This rapid back-and-forth has left businesses and consumers in limbo, unsure of the tariffs’ long-term fate.
Economic Impacts: A Double-Edged Sword
Trump’s tariffs have been a polarizing issue. Supporters argue that they protect American workers and industries by leveling the playing field against countries with unfair trade practices. The administration has claimed that the trade deficit—described as a national emergency—has harmed U.S. communities and weakened the defense industrial base. White House spokesperson Kush Desai stated, “It is not for unelected judges to decide how to properly address a national emergency. President Trump pledged to put America First, and the Administration is committed to using every lever of executive power to address this crisis.”
However, critics, including economists and business owners, warn that the tariffs could lead to higher prices for consumers, disrupt supply chains, and provoke retaliatory measures from trading partners. The nonpartisan Tax Foundation estimates that the tariffs could impose $1.4 to $2.2 trillion in additional costs on Americans over the next decade. Small businesses, like VOS Selections, a New York-based wine importer, have reported being unable to absorb the sudden cost increases, which threaten their survival. “We’re locked into pricing decisions that don’t account for these sudden, unpredictable tariffs,” said owner Victor Owen Schwartz.
Financial markets have reacted strongly to the developments. After the court’s ruling, Wall Street futures surged, with Dow futures rising nearly 500 points, and the U.S. dollar strengthened against currencies like the euro and yen. However, analysts warn that ongoing legal uncertainty could continue to roil markets. Chris Beauchamp from IG noted, “Investors are set to face more uncertainty as the Trump administration is likely to appeal the ruling and find newer ways to impose tariffs.”
Legal Challenges and the Road Ahead
The court’s decision is just one of at least seven legal challenges to Trump’s tariffs. Other lawsuits, including one filed by the New Civil Liberties Alliance in Florida and another by the Pacific Legal Foundation, argue that the tariffs violate constitutional principles like the nondelegation doctrine, which limits Congress’s ability to delegate legislative powers to the executive branch. Legal experts predict that the issue could ultimately reach the U.S. Supreme Court, especially given the administration’s swift appeal.
In the meantime, the Trump administration has several options. It could pursue tariffs through other legal avenues, such as Section 122 of the Trade Act of 1974, which allows temporary import taxes of up to 15% for 150 days to address trade imbalances. Alternatively, it could use existing trade laws focused on national security or unfair trade practices, though these require lengthy investigations and public comment periods. Analysts at Goldman Sachs suggest that Trump might also explore a 1930 trade law allowing tariffs of up to 50% on countries deemed to discriminate against the U.S.
The administration’s response has been defiant. White House deputy chief of staff Stephen Miller called the ruling a “judicial coup,” while Press Secretary Karoline Leavitt urged the Supreme Court to intervene, labeling the decision “judicial overreach.” However, some legal scholars, like Ilya Somin from George Mason University, argue that the court’s ruling aligns with conservative principles opposing excessive executive power. “If starting the biggest trade war since the Great Depression based on a law that doesn’t even mention tariffs is not an unconstitutional usurpation of legislative power, I don’t know what is,” Somin said.
What’s Next for U.S. Trade Policy?
The temporary reinstatement of the tariffs by the appeals court keeps them in effect for now, but the legal battle is far from over. The outcome could reshape U.S. trade policy and influence global economic relations for years to come. For businesses, the uncertainty complicates planning, as they grapple with fluctuating costs and supply chain challenges. For consumers, the threat of higher prices looms large, particularly for everyday goods like groceries and electronics.
As the case moves through the appeals process, all eyes will be on the courts—and potentially the Supreme Court—to determine whether Trump’s aggressive trade strategy can withstand legal scrutiny. For now, the ruling serves as a reminder that even bold executive actions must operate within the bounds of the law.
Additional Resources
- U.S. court blocks most Trump tariffs, says president exceeded his authority
- Federal trade court blocks Trump’s sweeping ‘Liberation Day’ tariffs
- US trade court blocks Trump’s sweeping tariffs in blow to trade policies
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