And while Canada, Mexico, and China had been left out of further hits on April 2, the three-judge panel extended its ruling to the tariffs announced on these countries earlier this year as well.
The setback for Trump 2.0 is major, as it undermines the very foundation the administration has been relying on to push through more advantageous deals with key trading partners.
Of course, the Trump team was quick to announce it would appeal the decision.
Under this week’s ruling, the Oval Office has 10 days to carry out the administrative work to remove these tariffs. Sanctions on steel, autos, and aluminum were not included in the ruling.
It is not clear how quickly the tariffs will be undone, or whether the White House will keep them in place while it pushes ahead to the court of appeals and potentially the Supreme Court—though completing such a task in 10 days may prove impossible.
Whatever the outcome, this wrench in the works may still have repercussions for the timeline of negotiations—a pressure the Trump administration has been keen to keep up. In his second term, Trump has routinely announced sanctions with fairly swift turnarounds.
What’s clear is that this ruling does not mark the conclusion of tariffs, but simply the beginning of the next chapter.
Indeed, S&P futures are up 1.7% at the time of writing, with Dow Jones futures also up 1.3%.
“We haven’t heard directly from President Trump on the matter yet, so it’s unclear how the administration might respond going forward,” Reid notes. “This could also have broader revenue implications, as they had been hoping to use tariffs as a source of revenue to fund other tax cuts.
“If the ruling did remain in place … one option for the administration would be to expand the use of other tariff instruments, like the Section 232 on national security grounds, which have been used for autos, steel, and aluminum tariffs.”
Goldman Sachs’ Alec Phillips chimed that he did not expect the tariff setback to alter the wider fiscal strategy of the administration, explaining, “Tariff revenue was never counted toward offsetting the cost of the package, and most lawmakers never made a clear link between the two issues.”
He added: “That said, the tariffs the court struck down were likely to raise nearly $200 billion on an annual basis, which is roughly the amount the fiscal package would increase the deficit next year (compared with current policy) and more than the impact in following years.”
Like Reid, Phillips expects Trump’s team to explore other legal routes to achieve the same aim.
Trump’s tariffs were blocked by the court as they relied on the International Emergency Economic Powers Act (IEEPA), however, this is not the only way to achieve sanctions. The court itself highlighted that Trump could use two sections of the 1974 Trade Act to impose tariffs of up to 15% for a maximum of 150 days (which can be extended by Congress) to address the balance of payments, or justify the action under Section 301 as addressing unfair trade practices.
“President Trump has not emphasized sectoral tariffs as frequently lately as he did earlier this year, but if the White House finds it has less flexibility on country-focused tariffs, sectoral tariffs might receive more attention again.”
He added: “Section 338 of the Trade Act of 1930 allows the president to impose tariffs of up to 50% on imports from countries that discriminate against the U.S. This authority, which has never been used, is similar to the authority under Section 301, except that it limits the amount of the tariffs but does not require a formal investigation.”
