It is impossible to overstate the impact of Wednesday night’s decision by a panel of three judges in New York who, at a stroke, upended the central pillar of President Donald Trump’s economic policies.
The little-known Court of International Trade in Manhattan ignited a process that may bring the President’s so-called Liberation Day crashing down around his ears. The judges ruled that when Trump took to the Rose Garden of the White House on 2 April and revealed the “reciprocal” tariffs that he was imposing on nations worldwide, he acted illegally.
They accepted the argument that only Congress has the power to impose or regulate tariffs, and eviscerated Trump’s argument that emergency laws afford him the authority to act. Trump’s use of the International Economic Powers Act, voted into law by Congress in 1977 to regulate commerce during times of national emergency, was deemed a dramatic over-reach. The court ruled that the law does not “confer such unbounded authority” on any US leader, and Trump’s actions “exceed any authority granted to the President…to regulate importatation by means of tariffs”.
To put the judges’ ruling another way: America is not a dictatorship.
The White House moved at lightning speed to launch an appeal against the court’s ruling. Trump spokesman Kush Desai insisted “it is not for unelected judges to decide how to properly address a national emergency”. That is exactly the same argument the White House is using to appeal against other court decisions that have sought to stay the President’s hand on the issue of mass deportations.
Trump announced his ‘reciprocal’ tariffs on 2 April (Photo: Brendan Smialowski / AFP via Getty Images)The stage is now set for a legal showdown with enormous implications for Trump’s entire economic strategy, and also for America’s trading partners worldwide. Trump has repeatedly promised Americans that his tariffs are raking in untold billions in revenues from nations that have “ripped America off”. Aboard Air Force One ahead of his “Liberation Day” announcement he insisted that “we’re going to become so rich, you’re not going to know where to spend all that money”. He has also repeatedly posited a future when he would be able to scrap federal income tax altogether, and fund the government entirely from tariff revenues.
Those sunny uplands may now have been placed firmly out of his reach, with the court giving him just 10 days to wind up his collection of tariff revenues or else face the possibility of legal sanctions. Tariffs imposed by the President before Liberation Day are unaffected by the court ruling, so duties on steel, aluminium, foreign cars and auto parts remain in effect because they were implemented using separate legal authorities.
The legal setback also has enormous implications for Trump’s broader national security policies. So many of them are now firmly rooted in the soil of his trade policy, with tariffs being used as a blunt instrument to force the country’s allies, partners and competitors to bend to his will.
Canada, for instance, has been repeatedly enjoined to become America’s 51st state if it wants to avoid bruising duties on its exports to its US neighbour. China has been warned to curb the flow of fentanyl, an opioid precursor, into the United States if it wants to secure some degree of tariff alleviation. And Mexico has been ordered to curb the human tide of migrants crossing into the US if it wants to graduate to lower-level Trump tariffs.
Several nations have even circumvented some of their own regulations to try and curry trading favour with Trump, including Vietnam which last week fast-tracked permission for Trump’s business empire to build a new golf complex just outside Hanoi in an effort to secure alleviation of 46 per cent “reciprocal” tariffs slapped on all its exports to the USA.
Trump’s allies are already circling the wagons, launching fresh assaults on the judiciary and insisting that a showdown with the courts is coming. Charlie Kirk, the founder of pro-Trump grassroots movement Turning Point USA, asked rhetorically on X: “With activist judges, what is even the point of having a president?!” He insisted that legal precedents exist for Trump to impose tariffs unilaterally, and argued that “the Trade Expansion Act of 1962…allows for adjustments to tariff rates without needing Congressional action”.
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While the White House was stunned by the court’s ruling, Trump is known to covet the standoff with the judiciary that is sure to follow. He has repeatedly argued that judges should have no power to stop him from enacting all the policies that he pledged on the campaign trail. While it has taken the courts almost two months to catch up with his “Liberation Day” actions, his White House lawyers will have been under misapprehension about the possibility of legal challenges.
Where this leaves the US-UK Economic Prosperity Deal, agreed between Trump and Sir Keir Starmer only three weeks ago, is unclear. It allows Trump’s baseline tariffs of 10 per cent to remain in place on most British exports to the United States, except for the steel, aluminium, and car carveouts that the President and the Prime Minister celebrated.
The court ruling also upends ongoing trade talks with other partners, including the EU, which Trump has claimed was “formed in order to screw the United States”. The Chinese government will also be paying very close attention to the judgment, given that Beijing remains on the receiving end of the most punitive tariffs that the President imposed on 2 April.
Having promised Americans that his trade war was ushering in a new “golden age” for America, Trump will assuredly now turn his firepower on the judiciary and accuse them of attempting to stymie him. Whether he adheres to court rulings on tariffs, mass deportations, the firing of federal government workers or a host of other issues will soon determine the outcome of his second term in the Presidency.
On the issue of tariffs at least, he is beginning to look like a busted flush.
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