US trade court blocks Trump's sweeping tariffs

A US federal court has blocked President Donald Trump's sweeping tariffs, in a major blow to a key component of his economic policies.

The Court of International Trade ruled that an emergency law invoked by the White House does not give the president unilateral authority to impose tariffs on nearly every country.

The Manhattan-based court said the US Constitution gives Congress exclusive powers to regulate commerce with other nations and this is not superseded by the president's remit to safeguard the economy.

Within minutes of the ruling the Trump administration lodged an appeal.

The ruling gave the White House 10 days to complete the bureaucratic process of halting the tariffs, although most are currently suspended anyway.

The court also blocked a separate set of levies the Trump administration imposed on China, Mexico and Canada since returning to the White House, in response to what it said was the unacceptable flow of drugs and illegal immigrants into the US.

"It is not for unelected judges to decide how to properly address a national emergency," White House deputy press secretary Kush Desai said in a statement.

"President Trump pledged to put America First, and the administration is committed to using every lever of executive power to address this crisis and restore American greatness," he added.

The lawsuit, filed by the nonpartisan Liberty Justice Center on behalf of five small businesses that import goods from countries targeted by the duties, was the first major legal challenge to Trump's so-called "Liberation Day" tariffs.

The attorney general of New York, one of 12 states involved in the lawsuit, welcomed the decision.

"The law is clear: no president has the power to single-handedly raise taxes whenever they like," Letitia James said.

"These tariffs are a massive tax hike on working families and American businesses that would have led to more inflation, economic damage to businesses of all sizes, and job losses across the country if allowed to continue," she added.

The court was not asked to address tariffs imposed on some specific goods like cars, steel and aluminium, using a different statute.

In the ruling, a three-judge panel said the International Emergency Economic Powers Act (IEEPA), a 1977 law that Trump cited to justify the tariffs, does not give him the power to impose the sweeping tariffs.

"The Worldwide and Retaliatory Tariff Orders exceed any authority granted to the President by IEEPA to regulate importation by means of tariffs. The Trafficking Tariffs fail because they do not deal with the threats set forth in those orders," they wrote.

Global financial markets have been on a rollercoaster ride since Trump announced the sweeping tariffs on 2 April because some measures were reversed or reduced as the White House negotiated with foreign governments.

Major stock markets rose in Asia on Thursday morning, with Japan's Nikkei 225 index up by around 1.5% and the Shanghai Composite about 0.7% higher.

US stock futures also jumped after the court ruling. Futures are contracts to buy or sell an underlying asset at a future date and are an indication of how markets will trade when they open.

The US dollar also made gains against safe-haven peers including the Japanese yen and Swiss franc.

What happens now?

The immediate implications of the court's ruling are unclear.

The case needs to go through the appeals process. If the White House is unsuccessful in its appeal, the US Customs and Border Protection Agency (CBP) will then issue directions to its officers, John Leonard, a former top official at the CBP, told the BBC.

That said, a higher court might be more Trump-friendly.

But if all courts do uphold the ruling, businesses who've had to pay tariffs will receive refunds on the amounts paid, with interest. These include the so-called reciprocal tariffs, which were lowered to 10% across the board for most countries and were raised to 145% on Chinese products, now 30%.

Mr Leonard said there won't be any changes at the border for now and tariffs will still have to be paid.

Steel and aluminium tariffs are not affected by Wednesday's ruling, as they fall under a different law from the emergency measures Trump invoked to justify his global tariff regime, he added.

Market reactions showed, partly, investors "exhaling after weeks of white-knuckle volatility sparked by trade war brinkmanship," Stephen Innes at SPI Asset Management wrote in a commentary.

US judges gave a clear message, Mr Innes said: "The Oval Office isn't a trading desk, and the Constitution isn't a blank cheque."

The ruling is "a structural pivot in the narrative: from strongman tariffs to institutional guardrails", he said.

"Executive overreach may finally have found its ceiling. And with it, a fresh dose of macro stability – at least until the next headline."

How did we get here?

On 2 April, Trump unveiled an unprecedented global tariff regime by imposing import taxes on most of the US's trading partners.

A 10% baseline tariff was placed on most countries, along with steeper reciprocal tariffs handed down to dozens of nations and blocs, including the EU, UK, Canada, Mexico and China.

Trump argued that the sweeping economic policy would boost American manufacturing and protect jobs.

Global markets have been thrown into disarray since the announcement and later after Trump's reversals and pausing of tariffs as foreign governments came to the negotiating table.

Adding to the turmoil was a prolonged trade war with China, as the world's two economic superpowers engaged in a back-and-forth raising of tariffs, which reached a peak with a 145% US tax on Chinese imports, and a 125% Chinese tax on US imports.

The world's two biggest economies have since agreed to a truce, with US duties on China falling to 30%, and Chinese tariffs on some US imports reducing to 10%.

The UK and US have also announced a deal on lower tariffs between the two governments.

However, in his latest move, Trump has threatened a 50% tariff on all goods coming from the EU.

But in another update this week, he agreed to extend the deadline for trade talks with the bloc by more than a month.

(Source: BBCNews)