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President Trump's tariff plan faces legal setback

Name: MHA
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· Posted on: May 29th 2025 · read

The US Court of International Trade has ruled that President Trump exceeded his executive authority under the International Emergency Economic Powers Act by imposing the ‘liberation day’ tariffs.

This ruling covers the reciprocal tariffs of 10% or more announced on 2nd April through a declaration by the President of a national emergency, as well as the 25% tariffs slapped on Canadian and Mexican goods in response to concerns around immigration, drug trafficking, and trade imbalances. The decision does not cover any of the sector-specific tariffs on goods such as automotives and steel.

This decision will be welcomed by the UK, EU, China, and other countries that have been adversely affected by President Trump's weaponisation of tariffs. The easing of some tariffs could calm inflationary pressures and stabilise worrying growth prospects, particularly in China, which has borne the brunt of Trump's tariff policy, and we’ve seen a positive response in stock markets around the world.

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But it also clouds the global economy in even deeper uncertainty. Governments around the world have spent recent months rewriting their economic strategies to fit with the realities of a deglobalising economy and realigned trading relationships.

Businesses have adapted their practices similarly. While imports surged in the first quarter as businesses looked to avoid tariffs from April, can we expect a similar effect while we wait for the decision of the appeal? Perhaps, but businesses continue to navigate murky waters and will be wary of making wholesale strategic changes in such a turbulent environment.

Not only will tariffs at US customs be halted for the foreseeable, but will businesses that have already paid ‘illegal’ tariffs on US imports be reimbursed? If so, this would be a sizeable task for the US customs authorities and businesses may be left in the dark for a long period of time.

"It also remains to be seen what effect this will have on the shipment of goods — reduced costs are likely to boost demand for trade and increase trade volumes, but disrupted supply chains will not fall magically back into place. There will be some disruption as these are put back together, and increased trade volume will require greater availability of vehicles and personnel that may be difficult to acquire."

Andrew Thurston, MHA

Where does this leave President Trump now?

Undoubtedly, he will fight back — the US administration has already signalled its intent to appeal the decision, and they will be exploring other legal avenues to reinstate the tariffs.

The legislation was initially passed via executive power to speed up the process — the President may now look to pass the legislation through a Republican-dominated US Congress, but this would be time-consuming and may not even pass due to slim majorities in both the House of Representatives and the Senate.

He may consider using the Trade Act of 1974 to support his cause. Section 122 of the Act states that in the event of an ‘international balance-of-payments disequilibrium,’ a president can impose a 15% tariff on imported goods. However, his decision to not use this route initially will make it difficult to fall back on it now, and the Act only enables the imposition of tariffs for a maximum of 150 days.

If the Court ruling is upheld, we can expect to see fresh trade negotiations opening up. Yet, there will be no return to normality. Trade has been severely disrupted across the world and the economic zeitgeist remains one of deglobalisation, and it remains a key target for the Trump administration as it seeks to rebalance the books with the rest of the world. Uncertainty will continue to rule the day and there are certainly more stories to be written in the Trump tariff saga.