The opinion marks a significant setback to the Republican leader as he bids to redraw the US trading relationship with the world by forcing governments to the negotiating table through tough new tariffs.
Trump argued that the resulting trade deficits and the threat posed by the influx of drugs constituted a “national emergency” that justified widespread tariffs.
The White House slammed the ruling, arguing that “unelected judges” have no right to weigh in on Trump’s handling of the issue.
The statement did not mention any legal challenge, although multiple US outlets said the Trump administration had already filed an appeal.
Trump unveiled sweeping import duties on most trading partners on April 2, at a baseline 10 percent, plus steeper levies on dozens of economies, including China and the European Union.
Some of the turmoil was calmed after he paused the larger tariffs for 90 days and suspended other duties pending negotiations with individual countries and blocs.
The federal trade court was ruling in two separate cases -- brought by businesses and a coalition of state governments -- arguing that the president had violated Congress's power of the purse.
“The court does not read IEEPA to confer such unbounded authority and sets aside the challenged tariffs imposed thereunder.”
The IEEPA authorizes the president to impose necessary economic sanctions during an emergency “to combat an unusual and extraordinary threat,“ the bench said.
The Justice Department has defended Trump's trade strategy in court, insisting that the judiciary has very limited authority over his actions and sparking criticism that the White House was attempting to usurp the power of the other branches of government.
Wall Street shares briefly bounced on Tuesday after Trump delayed the levies over the long holiday weekend -- although markets were down again Wednesday.
Gregory W. Meeks, the top Democrat on the House Foreign Affairs Committee, said the ruling confirmed what had long been known -- that “these tariffs are an illegal abuse of executive power.”
“Trump’s declaration of a bogus national emergency to justify his global trade war was an absurd and unlawful use of IEEPA,“ he added.
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