US President Donald Trump has suffered his biggest defeat in trade policy after a Federal Appeals Court ruled that most of his import tariffs were illegal. This ruling is not only a technical legal matter, but also has broad implications for domestic economic stability and international trade relations, which have been shaken by Trump’s unilateral measures.
Background to Trump’s Tariff Policy
Since the beginning of his administration, Trump has emphasized the importance of “economic sovereignty” and made tariffs a key weapon in his international trade strategy. He has repeatedly accused trading partners such as China, Mexico, Canada, and even small countries in Africa and South America of harming the US through unfair trade practices.
On April 2, in what he called “Liberation Day,” Trump announced a 10% base tariff on nearly all trading partners, as well as additional tariffs of up to 50% for certain countries. This measure even extends to small countries such as Lesotho and uninhabited areas said to be inhabited only by penguin colonies. This policy was claimed to be a form of domestic industry protection as well as an effort to force other countries to open their markets wider to American products.
Trump used the International Emergency Economic Powers Act (IEEPA) of 1977 as a legal basis, arguing that the trade deficit was a “national emergency.” However, this move sparked harsh criticism from legal and economic experts as it was considered an abuse of executive power.
Court Ruling
In a 7-4 ruling, the Court of Appeals rejected Trump’s justification. According to the judges, although the IEEPA does give the President broad authority to regulate international transactions in emergency situations, the law was never intended to give him unlimited power to set tariffs.
“The US Constitution explicitly grants the authority to impose taxes and tariffs only to Congress,” the court wrote in its ruling. Thus, Trump’s actions were deemed to have “no limits on scope, amount, or duration” and exceeded the limits set by law.
Economic and Political Implications
Before the court’s intervention, Trump’s tariffs were expected to affect 69% of total US imports. With the cancellation, the impact will only affect around 16%. Even so, this uncertainty has been enough to shake global markets, causing price fluctuations and worsening the sentiment of international investors, who since April have been confused about the direction of US economic policy.
The US government itself has warned that the removal of tariffs could hit the country’s finances. As of July, tariff revenues had reached USD 159 billion, double that of the same period last year. The Department of Justice even warned that the cancellation of tariffs could cause “financial ruin” for the US.
Cancelled and Remaining Tariffs
The tariffs ruled illegal include the “reciprocal tariffs” announced in April, as well as special tariffs on Canada, Mexico, and China that Trump linked to the issue of fentanyl drug trafficking. All of these tariffs are considered to have no legal basis. However, not all of Trump’s trade strategies have failed. Sectoral tariffs on steel and aluminum, known as Section 232 tariffs, remain safe because they use a different legal basis that is more difficult to challenge in court. In fact, the government recently expanded the scope of these tariffs to include more than 400 additional product categories. These tariffs are seen as a “mainstay” of Trump’s trade strategy that will likely remain in place until the next administration. In addition, Trump has also removed the duty-free limit for imports valued at less than USD 800. This policy adds to the burden on American small and medium-sized businesses, but remains safe from court intervention.
Trump’s Reaction and Future Prospects
Trump responded to this ruling angrily, calling the court “partisan” and warning that if this decision is allowed to stand, the United States will face “total destruction.” He is determined to appeal to the Supreme Court, which currently has a conservative majority and could potentially issue a different ruling.
However, if the Supreme Court continues to reject IEEPA-based tariffs, Trump’s room for maneuver will be greatly reduced. He can still use the Trade Act of 1974, but that law only allows for a maximum tariff of 15% and is valid for a temporary period of 150 days, unless there is an extension from Congress.
This shows that Trump’s unilateral strategy of using tariffs as an economic diplomacy weapon is now at a crossroads. On the one hand, he has succeeded in pressuring other countries to renegotiate trade agreements. But on the other hand, his aggressive moves have created great uncertainty that is detrimental not only to the United States but also to the global economy as a whole.
Author: Nazwa
References:
Bogage, Jacob, and Emily Davies. “Ruling on Trump’s Tariffs Is a Major Setback for the White House.” The Washington Post, August 30, 2025. https://www.washingtonpost.com/politics/2025/08/30/trump-tariff-policy-in-jeopardy/
Gabbatt, Adam, and Dominic Rushe. “Here’s What to Know about the Court Ruling Striking down Trump’s Tariffs,” The Guardian. The Guardian, August 30, 2025. https://www.theguardian.com/us-news/2025/aug/30/trump-tariffs-explainer.
Knauth, Dietrich, Nate Raymond, and Tom Hals. “Most Trump Tariffs Are Not Legal, US Appeals Court Rules.” Reuters, August 30, 2025. https://www.reuters.com/legal/government/most-trump-tariffs-are-not-legal-us-appeals-court-rules-2025-08-30/.
Kopack, Steve, and Rob Wile. “Trump’s Tariff Push Overstepped Presidential Powers, Appeals Court Says.” NBC News, August 29, 2025. https://www.nbcnews.com/business/business-news/trump-tariffs-lawsuit-appeals-court-ruling-what-to-know-rcna223915.
