Most of Trump’s Tariffs Ruled Illegal by U.S. Appeals Court

A divided U.S. Court of Appeals ruled on Friday that most of former President Donald Trump’s tariffs were unlawful, striking at the core of a key international economic policy tool used during his administration.

The court allowed the tariffs to remain in effect until October 14, giving the Trump administration an opportunity to appeal the decision before the U.S. Supreme Court.

The ruling comes just as the Supreme Court is set to hear a separate case concerning the Federal Reserve’s independence, raising the prospect of an unprecedented legal showdown over Trump’s broader economic agenda this year.

During his second term, Trump made tariffs a central pillar of U.S. foreign policy, using them both to exert political pressure and to force trading partners to renegotiate agreements. While the tariffs helped extract concessions from certain partners, they also introduced volatility into financial markets.

Reacting to the decision, Trump expressed disappointment, calling the appeals court “highly partisan.” On Truth Social, he warned: “If these tariffs are ever removed, it will be totally devastating for our country.” Still, he predicted the ruling would ultimately be overturned, saying he expected the Supreme Court to uphold tariffs as beneficial to the nation.

The 7-4 decision by the D.C.-based Court of Appeals examined both the “reciprocal” tariffs Trump imposed in April under his trade war strategy, as well as separate tariffs levied in February on China, Canada, and Mexico.

Of the judges, six in the majority and two in dissent were appointed by Democratic presidents, while one in the majority and two in dissent were appointed by Republicans. The ruling does not affect other tariffs issued under separate legal authorities, such as Trump’s steel and aluminum import duties.

Court Questions Trump’s Use of Emergency Powers

Trump had justified both sets of tariffs under the International Emergency Economic Powers Act (IEEPA), which allows presidents to respond to “unusual and extraordinary threats” during a declared national emergency.

The court, however, ruled: “The statute grants the president significant authority to act in response to a declared national emergency, but that authority does not explicitly include imposing duties, tariffs, or similar taxes.”

Historically, the 1977 law has been used to impose sanctions or freeze assets of foreign adversaries—not to implement tariffs. Trump was the first president to invoke IEEPA for such measures, arguing that persistent trade deficits, declining U.S. manufacturing capacity, and cross-border drug flows warranted the action.

The Justice Department defended Trump’s position, saying IEEPA allowed tariffs as part of regulating or even halting imports during an emergency. Trump had declared a national emergency in April, citing America’s decades-long imbalance of imports over exports.

He also argued that tariffs imposed on China, Canada, and Mexico were justified because those countries were not doing enough to stop illegal fentanyl shipments into the U.S.—a claim those governments have disputed.

Markets React Cautiously

While the decision introduces fresh uncertainty, market reaction was muted. William Reinsch, a former Commerce Department official now at the Center for Strategic and International Studies, noted that the Trump administration had long anticipated this outcome and likely prepared “a Plan B” to preserve the tariffs under other statutes.

Art Hogan, chief market strategist at B. Riley Wealth, said: “The last thing markets or corporate America need is more uncertainty on trade.”

Meanwhile, Trump is also engaged in a legal battle over his attempt to remove Federal Reserve Governor Lisa Cook—a move that could undermine the central bank’s independence.

“This brings Trump’s entire economic agenda on a collision course with the Supreme Court,” said Josh Lipsky, director of international economics at the Atlantic Council. “We’ve never seen anything quite like this.”

The Supreme Court, which has a 6-3 conservative majority, has generally supported Trump’s second-term policy agenda but has also resisted expansive interpretations of older laws that could hand presidents sweeping new powers.

Multiple Challenges to Trump’s Tariffs

The appeals court decision stemmed from two separate cases: one filed by five small U.S. businesses, and another by 12 Democratic-led states. Both argued that IEEPA does not authorize tariffs and that under the Constitution, Congress—not the president—has authority over taxes and duties. Any delegation of that power, they said, must be clear and limited.

In May, the U.S. Court of International Trade in New York similarly ruled against Trump’s tariff policies, stating he had exceeded his authority. That three-judge panel included one judge appointed by Trump himself.

Another Washington court also ruled that IEEPA does not authorize tariffs, a decision the government has appealed. At least eight lawsuits—including one filed by California—have challenged Trump’s trade measures.