Trump's Tariffs Temporarily Cleared By Appeals Court Hours After Judges Rule Them Illegal
President Donald Trump’s ability to unilaterally impose sweeping tariffs was restored Thursday, less than 24 hours after a judge said they had no legal justification.
The ruling from the United States Court of Appeals for the Federal Circuit allows the White House to keep its steepest tariffs in place while the court considers the appeal of a lower court’s decision Wednesday night that had blocked the taxes.
The initial ruling from a three-judge panel in the U.S. Court of International Trade found the Trump administration couldn’t rely on a 1977 law and the growing federal deficit to justify tariffs. The ruling had stripped the White House of its legal justification for the raft of “Liberation Day” tariffs, the administration’s main leverage point in the ongoing trade war.
The Trump administration said it would appeal the decision, and policy experts had expected the White House to find workarounds to maintain its current trade posture regardless of the trade court’s ruling.
“The tariff levels that we had yesterday are probably going to be the tariff levels that we have tomorrow, because there are so many different authorities the administration can reach into to put it back together,” Michael Zezas, Morgan Stanley’s global head of fixed income and thematic research, said on Bloomberg TV early Thursday, before the appeals court had ruled.
Trump relied on the International Emergency Economic Powers Act to impose some of the administration’s steepest levies, saying that steep trade deficits amounted to a national emergency. The argument was rejected by the panel of judges, which included a Trump appointee as well as judges appointed by Barack Obama and Ronald Reagan.
“The Worldwide and Retaliatory Tariff Orders exceed any authority granted to the President by IEEPA to regulate importation by means of tariffs,” the court wrote in a unanimous decision, according to an Associated Press report.
The judges gave the federal government 10 days to wind down collection of the tariffs, but the appeals court is allowing the taxes to remain in place pending its decision. The Trump administration and the groups suing them in the case — 12 states led by Democrats and Liberty Justice Center, a libertarian legal advocacy group — have until early next month to file written arguments regarding the legality of Trump’s tariff regime, CNN reported.
The Supreme Court is expected to eventually be asked to weigh in.
The White House believes the trade deficits amount to a national emergency “that has decimated American communities, left our workers behind, and weakened our defense industrial base,” White House spokesperson Kush Desai told the AP after the tariffs were blocked.
He said the administration was “committed to using every lever of executive power to address this crisis and restore American Greatness.”
News of the freeze sent stock futures higher overnight, but investors' exuberance waned in early trading and markets closed largely flat after the appeals court restored Trump’s tariff authority, at least temporarily.
Treasury yields also waffled on the announcements, in part because the White House had said revenue from tariffs would help pay down the federal deficit, which continues to balloon, dragging down faith in U.S. credit. Yields on 10-year U.S. Treasury bonds rose five basis points in early trading after the announcement but have since fallen back roughly to where they were a week ago.
Even if the steepest of Trump’s tariffs are blocked by the courts, the administration is likely to use other trade rules and levers to impose the levies, Goldman Sachs analyst Alec Philips wrote in a note before the appeals court stepped in Thursday.
“For now, we expect the Trump administration will find other ways to impose tariffs, so we still expect most of this revenue to materialize,” Philips told investors.
UPDATE, MAY 29, 5 P.M. ET: This story has been updated to reflect developments from the United States Court of Appeals for the Federal Circuit.
