`Liberation Day'?: Federal court rules that most Trump tariffs are illegal and unconstitutional

The cowardly Republican-controlled Congress failed to take any action to reassert the legislative branch's authority over tariff policy. House Speaker Mike Johnson made it clear that he would use all legislative tools to prevent a vote on repealing President Donald Trump's tariffs.

But an obscure federal court on Wednesday blocked Trump from imposing his sweeping "Liberation Day" tariffs, announced April 2, on imports from most countries under an emergency powers law. The court declared that Trump's use of the 1977 International Economic Emergency Powers Act (IEEPA) to impose the sweeping tariffs was illegal and unconstitutional.

CBS News said the decision by a three-judge panel on the U.S. Court of International Trade "froze many of the large-scale tariffs imposed by President Trump on virtually every foreign nation, ruling the levies exceed the president's legal authority."

CBS wrote:

The ruling "halted the sweeping 10% tariffs Mr. Trump assessed on virtually every U.S. trading partner on "Liberation Day" last month, with higher tariffs threatened for dozens of countries. The court also blocked a separate set of tariffs imposed on China, Mexico and Canada by the Trump administration, which has cited drug trafficking and illegal immigration as its reasoning for the hikes.

The unanimous ruling was issued by a panel of judges appointed by Ronald Reagan, Barack Obama and Trump.

The Associated Press wrote that the ruling throws "into doubt Trump’s signature set of economic policies that have rattled global financial markets, frustrated trade partners and raised broader fears about inflation intensifying and the economy slumping."

The court ruling is a major blow to Trump's flawed economic agenda which is based on a combination of tariffs, spending cuts and tax cuts. Trump has long held a delusional view that tariffs are a cure-all for all kinds of economic ills, including raising more revenue to offset income tax cuts and bringing manufacturing jobs back to the U.S.

Just wielding control over tariff policy also offered Trump the opportunity for widespread grift by carving out exemptions for companies which support him.

Analysts said the court ruling gives the Trump administration less leverage in its trade negotiations with other countries.

Simon Lester, a longtime trade watcher and nonresident fellow for the Baker Institute International Economics Program, posted on X:

“So if you are a foreign government negotiating with the Trump administration about the IEEPA ‘Liberation Day’ tariffs, and the tariffs have now been struck down (pending a probable appeal), it may be time to recalibrate your negotiating position.”

But the court ruling had little impact on U.S. and foreign financial markets because of all the uncertainty regarding what comes next regarding tariff policy. On Thursday afternoon, the Dow Jones Industrial Average was basically on a flatline from yesterday's close, while the S&P 500 and Nasdaq showed modest gains.

The Economist quoted a Goldman Sachs analyst who claimed trade uncertainty “has increased, rather than decreased, as a result of the court’s decision.”

Last night, the Trump administration said it will appeal the ruling to the Federal Circuit Court of Appeals. The administration is expected to ask appellate court for a stay, which if granted would leave the tariffs in place while the case is argued. And ultimately the case is expected to end up before the U.S. Supreme Court.

The court left in place 25% tariffs on foreign steel, aluminum and autos, pending a Commerce Department investigation. Other sectoral tariffs, including those on pharmaceuticals and semiconductors, were also exempted from the ruling. These were not imposed under the IEEPA, but under another trade act.

The Economist wrote that Trump could turn to "alternative powers" under the 1974 Trade Act to impose sweeping tariffs of 15% for 150 days on specific countries the administration deems to be engaged in unfair trade policies. But these tariffs can only be imposed after an investigation, public notice and a comment period.

In its ruling, the trade court combined two of at least seven lawsuits that have been filed challenging Trump's tariff levies.

The first was a lawsuit filed by a conservative, pro-business legal group, the Liberty Justice Center (LJC). The plaintiffs were five small businesses, including a Utah pipe company and a Pennsylvania-based tackle shop, whose owners said they would be irreparably harmed because they relied on imports from countries like China and Mexico.

The other lawsuit was brought by a dozen states – most of them Democratic-governed – which claimed that Trump's tariff policy has been subject to his "whims rather than the sound exercise of lawful authority."

The states listed as plaintiffs in the lawsuit were Oregon, Arizona, Colorado, Connecticut, Delaware, Illinois, Maine, Minnesota, Nevada, New Mexico, New York and Vermont. California also filed a lawsuit challenging Trump's tariffs.

Both lawsuits made the same argument that Trump's use of the 1977 International Economic Emergency Powers Act (IEPPA), is unlawful and unprecedented. They claim that the IEEPA authorizes such emergency actions as imposing economic sanctions or freezing assets, but doesn't authorize the president to impose tariffs. The lawsuits noted that this is the first time in the IEEPA's nearly 50-year history that a president has attempted to use this law to impose tariffs.

The judges on the Court of International Trade agreed with the plaintiffs' arguments.

"The question in the two cases before the court is whether the International Emergency Economic Powers Act of 1977 ("IEEPA") delegates these powers to the president in the form of authority to impose unlimited tariffs on goods from nearly every country in the world," the three-judge panel wrote in an unsigned opinion.

"The court does not read IEEPA to confer such unbounded authority and sets aside the challenged tariffs imposed thereunder."

Furthermore, the three-judge panel wrote that any interpretation of the IEEPA that "delegates unlimited tariff authority is unconstitutional."

The court said Mr. Trump's global 10% tariffs aren't authorized by IEEPA because they're designed to deal with trade imbalances between the U.S. and the rest of the world, which the judges said should fall under non-emergency legislation. 

In a news release, Oregon Attorney General Dan Rayfield said:

“President Trump’s sweeping tariffs were unlawful, reckless, and economically devastating. They triggered retaliatory measures, inflated prices on essential goods, and placed an unfair burden on American families, small businesses and manufacturers. We brought this case because the Constitution doesn’t give any president unchecked authority to upend the economy.”

New York Attorney General Letitia James issued a statement calling the decision "a major victory."

“The law is clear: no president has the power to single-handedly raise taxes whenever they like. These tariffs are a massive tax hike on working families and American businesses that would have led to more inflation, economic damage to businesses of all sizes, and job losses across the country if allowed to continue.

Jeffrey Schwab, Senior Counsel and Director of Litigation at the Liberty Justice Center, said, “This ruling reaffirms that the President must act within the bounds of the law, and it protects American businesses and consumers from the destabilizing effects of volatile, unilaterally imposed tariffs.”

Co-counsel Ilya Somin, a professor at George Mason University's Antonin Scalia School of Law, said: "It’s great to see that the court unanimously ruled against this massive power grab by the President. The ruling emphasizes that he was wrong to claim a virtually unlimited power to impose tariffs, that IEEPA law doesn’t grant any such boundless authority, and that it would be unconstitutional if it did.”

Here is a link to the decision.

On the libertarian website, Reason, Somin wrote that the court had "issued a permanent injunction against implementation of the various IEEPA tariffs. That means they are blocked with respect to all importers, not just the plaintiffs in the two cases."

Somin told Politico that the court’s ruling also means that the government may have to pay back duties it has already collected.

If there is no stay of the ruling, the trade court gave the administration 10 days to effectuate its order to stop collecting the tariffs, Barron's reported.

White House spokesperson Kush Desai reacted to the ruling in a statement that reiterated Trump's justification for imposing the tariffs, saying that the U.S.'s trade deficits with other countries have "created a national emergency that has decimated American communities."

Desai wrote:

"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 and restore American Greatness."

But it can hardly be considered an emergency given that the U.S. has run a trade deficit with the rest of the world every year since 1976.

White House deputy chief of staff Stephen Miller went even further. In a post on X, Miller said: "The judicial coup is out of control."

If the tariffs are struck down it could complicate efforts in the Senate to pass the reconciliation bill that was narrowly approved in the House. The Trump administration has argued that money collected from tariffs could help cover some of the costs of extending the tax cuts passed in 2017 that largely benefit the wealthy.

“Increased revenues from tariffs (approximately $150 billion per year) could have helped offset some of the deficit from the reconciliation package,” Aniket Shah, head of sustainability and transition strategy at Jefferies, wrote in a note to clients Wednesday, CNN reported.

And if the case goes to SCOTUS all bets are off. The Roberts court would find itself torn between showing deference to Trump's executive authority and its proclivity for issuing pro-business rulings.

The lawsuits challenging the tariffs invoked the U.S. Supreme Court's major questions doctrine, long championed by conservative lawyers and judges, which holds that in matters of vast economic and political significance, federal agencies and the executive must have clear and specific authorization from Congress. Article I of the U.S. Constitution grants Congress sole authority to control tariffs, which it does by passing detailed tariff statutes.

The major questions doctrine was used by the Supreme Court to block President Joe Biden's attempt to cancel roughly $400 billion in student loan debt and a COVID-era vaccine mandate for companies with more than 100 employees.

If the case is heard by the Supreme Court, Somin told CBS News, "We believe the court's precedent requires them to rule in our favor."