A US federal court has ruled that former President Donald Trump overstepped his authority by imposing a series of tariffs earlier this year, dealing a blow to the administration’s trade agenda and setting the stage for a protracted legal battle that could reach the Supreme Court.
The Manhattan-based Court of International Trade issued a unanimous decision on Wednesday, saying Trump’s use of emergency powers under the International Emergency Economic Powers Act (IEEPA) to impose tariffs violated the UA Constitution, which gives Congress — not the president — the sole authority to regulate commerce with foreign nations.
The court’s ruling invalidates a 10% blanket tariff order signed by Trump in January, a 20% tariff on Chinese imports, and some 25% tariffs on Canadian and Mexican goods that were not in compliance with the United States-Mexico-Canada Agreement (USMCA). Tariffs on steel, aluminum, and autos remain in place.
The decision followed a lawsuit brought by a conservative advocacy group representing small businesses and included a permanent injunction on the contested tariffs. The court gave the White House 10 days to implement the ruling but did not provide specifics on how to unwind the tariffs.
White House trade advisor Peter Navarro defended the legality of the tariffs and signaling that the fight is far from over.
“We have a strong case,” Navarro said. “There’s no question that there was an economic emergency to justify the legislation that Trump used to bypass Congress… Nothing has really changed. Trade deals are going to happen anyway.”
More uncertainty for markets
Analysts, however, warned that the ruling introduces a new layer of uncertainty for markets and businesses already navigating volatile policy shifts.
“Yes, the exploding US debt is a real issue – but slapping tariffs on everyone isn’t the answer,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank. “The whole thing felt like four-year-olds were playing in a room and an adult finally stepped in to stop the chaos.”
Ozkardeskaya noted that while the Federal Reserve has not taken immediate action, a resolution of the tariff issue could lead to a market rally. “If the court ruling holds and tariffs are blocked, brace for a global risk rally across major indices, the US dollar, and commodities on improved global growth expectations.”
Bill Adams, chief economist at Comerica Bank, said the court ruling could deepen business caution. “The surprise court decision reinforces the depth of uncertainty overhanging the economy in 2025. Tariff uncertainty [is] causing many businesses to slow-roll investment and hiring decisions while they wait for clarity.”
Kathleen Brooks, research director at XTB, warned that the legal fight is far from over and could continue to cast a shadow over markets. “The latest legal challenge to Trump’s tariffs could be the start of a long wrangle between the courts and the White House, and tariffs may still be implemented.”
She added that the ruling focused on how the tariffs were enacted, not the tariffs themselves. “Tariffs are now a fact of life, and they will continue to weigh on the global macro-outlook for some time, which is why the post-court ruling stock market rally was always going to run out of steam.”