A panel of federal judges on Wednesday blocked President Trump from imposing some of his steepest tariffs on China and other major U.S. trading partners, handing a significant legal setback to the administration’s aggressive trade policy.
The ruling from the U.S. Court of International Trade (CIT) agreed that IEEPA provides the President authority to regulate imports during declared national emergencies. However, they stressed that Congress had deliberately intended this authority to be narrowly applied.
- “The legislative history surrounding IEEPA confirms that the words ‘regulate . .. importation’ have a narrower meaning than the power to impose any tariffs whatsoever,” the court noted.
Rules: The CIT outlined four conditions necessary under IEEPA for the president to legitimately impose tariffs:
- First, a clear threat to national security, foreign policy, or the economy, originating primarily from outside the United States.
- Second, the threat must be unusual and extraordinary.
- Third, a national emergency must be formally declared regarding the threat.
- And crucially, fourth, the president’s action must directly “deal with” the emergency identified.
Ruling: The court sided with plaintiffs, who argued that Trump’s tariffs fell short of the final condition. The judges emphasized that “deal with” requires a direct causal link between the imposed action and the problem it aims to resolve.
- “A tax deals with a budget deficit by raising revenue. A dam deals with flooding by holding back a river,” the court explained. “But there is no such association between imposing a tariff and the ‘unusual and extraordinary threats’ the administration cites.”
- While the government defended the tariffs as part of a diplomatic strategy designed to pressure other nations into addressing trafficking and similar threats, the court concluded that such an indirect rationale failed to meet the legal threshold established by IEEPA.
Looking Ahead: A federal appeals court granted the Trump administration’s request to temporarily pause a lower-court ruling that struck down most of President Donald Trump’s tariffs.
- The Trump administration had told the U.S. Court of Appeals for the Federal Circuit that it might seek “emergency relief” from the Supreme Court.
Bottom Line: Removing tariffs could indeed ease inflationary pressures, potentially giving the Fed more flexibility to pursue a looser monetary policy stance. If inflation expectations cool, the Fed may feel more comfortable holding or even cutting interest rates, which would benefit bond markets by lowering yields and mortgage rates.