The US Court of Appeals for the Federal Circuit has dealt a big blow to US President Donald Trump by knocking down his decision to levy wide-ranging duties on a host of countries, saying the President exceeded his authority in tapping emergency economic powers.
The 7-4 ruling by the Federal Court on Friday affirmed a lower court’s decision, but allowed the tariffs to remain in place for now.
The ruling, which called Trump’s decision to impose taxes on a host of countries audacious, largely upheld a May decision by a specialised federal trade court in New York. However, the 7-4 appeals court decision tossed out a part of that ruling striking down the tariffs immediately, thereby allowing his administration time to appeal to the US Supreme Court.
Also Read: Discord resolution with the US still on the cards: Govt sources
Which tariffs did the court knock down?
On April 2, which Trump later called ‘Liberation Day’, he imposed so-called reciprocal tariffs of up to 50 per cent on countries with which the United States runs a trade deficit. A 10 per cent baseline tariff was imposed on everyone one.
Before April, the US President had slapped tariffs and levies on China, Mexico, and Canada in February – all of whom were US trading partners – saying that the illegal flow of immigrants and drugs across the US border amounted to a national emergency and that the three countries needed to do more to stop it.
The President acted with impunity without congressional approval, quoting the 1977 International Emergency Economic Powers Act, under which he declared the United States' longstanding trade deficits “a national emergency.”
He then suspended the reciprocal tariffs for 90 days, to give countries time to negotiate trade agreements with the United States and reduce their barriers to American exports.
Those who agreed to lopsided deals with Trump, including United Kingdom, Japan and the European Union, avoided the bigger tariffs. But those didn’t budge under the American pressure, such as Laos and Algeria, faced his wrath with a 40 per cent and 30 per cent tariff, respectively. The baseline tariffs were also kept in place.
The court challenge does not cover other Trump tariffs, including levies on foreign steel, aluminum and autos, that the president imposed after Commerce Department investigations concluded that those imports were threats to US national security.
Nor does it include tariffs that Trump imposed on China in his first term as President, and which former President Joe Biden kept, after a government investigation concluded that the Chinese used unfair practices to give their own technology firms an edge over rivals from the United States and other Western countries.
What’s the 1977 International Emergency Economic Powers Act?
The US Constitution gives Congress the power to set taxes, including tariffs. But lawmakers have gradually let presidents assume more power over tariffs, which Trump has made the most of.
The US administration had argued that courts had approved then-President Richard Nixon's emergency use of tariffs in the economic chaos that followed his decision to end a policy that linked the US dollar to the price of gold. The Nixon administration successfully cited its authority under the 1917 Trading with Enemy Act, which preceded and supplied some of the legal language later used in IEEPA.
Trump’s choice going forward
A dissent from the judges who disagreed with Friday's federal appeals court ruling clears a possible legal path for Trump, concluding that the 1977 law allowing for emergency actions “is not an unconstitutional delegation of legislative authority under the Supreme Court's decisions,” which have allowed the legislature to grant some tariffing authorities to the president.
The government has argued that if Trump's tariffs are struck down, it might have to refund some of the import taxes that it's collected – totaling USD 159 billion by July – delivering a financial blow to the US Treasury.
The Justice Department, in fact, warned in a legal filing this month that revoking the tariffs could mean “financial ruin” for the United States.
It could also put Trump on shaky ground in trying to impose tariffs going forward, as his administration loses its negotiating strategy, which may embolden foreign governments to resist future demands, delay implementation of prior commitments, or even seek to renegotiate terms.
The president has vowed to take the fight to the Supreme Court. “If allowed to stand, this Decision would literally destroy the United States of America,” he wrote on his social medial platform.
Trump does have alternative laws for imposing import taxes, including the Trade Act of 1974, and Section 232 of the Trade Expansion Act of 1962.
In May, the trade court had noted that Trump retains more limited power to impose tariffs to address trade deficits under the Trade Act of 1974 that restricts tariffs to 15 per cent and to just 150 days on countries with which the United States runs big trade deficits.
Trump’s administration could also invoke levies under Section 232 of the Trade Expansion Act of 1962, as it did with tariffs on foreign steel, aluminum and autos, which requires a Commerce Department investigation and cannot simply be imposed at the president's own discretion.
Follow us
