In a significant legal defeat for President Donald Trump, the Court of International Trade, based in New York, ruled on Wednesday that his administration's sweeping tariffs on global trade were illegal. The three-judge panel sided with small businesses and states led by Democratic officials who had contested the president's use of emergency law to justify the tariffs, which had targeted virtually every U.S. trading partner.
The decision, which prevents the implementation of these widespread levies, was met with enthusiasm by the financial markets, with stocks rising sharply in response. The S&P 500 future climbed 1.6 percent, while the Dow Jones Industrial Average future saw a 1.2 percent increase in early trading.
The ruling centered on the 1977 International Emergency Economic Powers Act (IEEPA), with the court stating that the president had overstepped the bounds of his authority. "The Worldwide and Retaliatory Tariff Orders exceed any authority granted to the President by IEEPA to regulate importation by means of tariffs," the judges articulated in their decision.
President Trump, when faced with the acronym "TACO trade" coined by Financial Times columnist Robert Armstrong and used by Wall Street traders to mock his negotiation tactics, showed visible anger. The term, which stands for "Trump Always Chickens Out," implies that Trump often threatens severe tariffs only to later retract them. In a heated exchange with CNBC reporter Megan Cassella, President Trump defended his strategy, emphasizing negotiation. “It’s called negotiation. You set a number, and if you go down, you know, a little bit they want me to hold that number, 145 percent tariff even. I said man, that really got up,” Trump explained.
Despite the court's ruling, the White House was quick to criticize the decision, with White House spokesman Kush Desai insisting that unelected judges should not have a say in how national emergencies are handled. He highlighted the trade deficits caused by foreign countries' treatment of the U.S., which he claims have left American workers behind and weakened the national defense industrial base.
Stephen Miller, a senior advisor to Trump, went further, framing the court's decision as a judicial overreach on social media. The Trump administration stands firm in its intention to appeal the ruling, potentially escalating the matter to the Supreme Court.
The court's deliberation focused on the 10 percent tariffs imposed last month and the larger tariffs threatened against various countries. By invoking the 1977 federal emergency law, Trump had sought to justify levies on countries like Canada, Mexico, and China, among others. However, the court found the expansive use of tariff authority to be beyond the scope of the IEEPA, deeming such an interpretation unconstitutional.
International markets reacted favorably to the court's decision, with Japan's Nikkei 225 index jumping 1.5 percent and the dollar strengthening against the yen. In Asia, reactions were also positive, with Japan appealing for the cancellation of tariffs on its imports, and South Korea's Kospi index surging following the ruling and an interest rate cut by the Bank of Korea.
Trump had boldly announced the global tariffs at a Rose Garden ceremony he dubbed "Liberation Day," with the goal of addressing long-standing trade deficits. The current ruling represents a significant blow to this cornerstone of his trade policy agenda.
