Court Shocks Trump’s Trade War: Tariffs Crushed

A federal court in New York dropped a bombshell on May 28, 2025, ruling that President Donald Trump’s sweeping tariffs—his signature economic weapon—were illegal. The U.S. Court of International Trade, in a unanimous decision by a three-judge panel, declared that Trump overstepped his authority under the International Emergency Economic Powers Act (IEEPA) of 1977. The ruling halts tariffs imposed on April 2, 2025, including a 10% universal levy on all U.S. imports, 25% duties on Canada and Mexico, and 30% tariffs on China. With global markets reeling and trade talks teetering, this decision could reshape the world economy. Here’s the raw breakdown of what happened, why it matters, and what’s next.

The Ruling That Stopped a Trade War

On May 28, 2025, at 8:32 p.m. EDT, the U.S. Court of International Trade in Manhattan issued a seismic ruling in two lawsuits—one led by 12 Democratic-led states, including Oregon and New York, and another by the Liberty Justice Center representing five small U.S. businesses. The court’s 60-page opinion was blunt: Trump’s tariffs, announced as “Liberation Day” on April 2, 2025, and justified under IEEPA, were “unlawful as to all.” The judges—appointed by Presidents Reagan, Obama, and Trump—argued that IEEPA, a law historically used for sanctions, not tariffs, doesn’t grant the president “unbounded authority” to tax imports globally.

The court ordered a permanent injunction, giving the Trump administration 10 days to halt tariff collection. The decision nullified:

• A 10% baseline tariff on all U.S. imports.
• 25% tariffs on Canadian and Mexican goods, tied to drug trafficking claims.
• 30% tariffs on Chinese imports, also linked to fentanyl trafficking.
• Paused “reciprocal” tariffs (20–50%) on 60+ trading partners, set to start July 9, 2025.

“This is a victory for the rule of law,” said Oregon Attorney General Dan Rayfield, whose state co-led the lawsuit. “Trump’s tariffs were reckless and economically devastating.” New York Attorney General Letitia James echoed, “No president can single-handedly raise taxes whenever they like.”

Trump’s Tariff Gambit: A Risky Play

Trump unveiled his tariffs on April 2, 2025, in a fiery Rose Garden speech, branding them “Liberation Day” to fix a $1.2 trillion U.S. goods trade deficit. He claimed the trade imbalance, persistent since 1975, was a “national emergency” under IEEPA, justifying unilateral action without Congress. Additional tariffs on Canada, Mexico, and China were pitched as leverage to curb fentanyl and migration. On April 9, Trump paused the steepest tariffs for 90 days, keeping a 10% baseline. By May 12, the U.S. and China agreed to a 90-day tariff pause for trade talks.

The strategy was bold but divisive. Trump argued tariffs would bring manufacturing jobs back to the U.S., but critics, including the National Retail Federation, warned of $46–78 billion in lost consumer spending power annually. The Wall Street Journal called it “the dumbest trade war in history.” Businesses, from small importers to giants, faced supply chain chaos and price spikes. California, the nation’s largest economy, reported “hundreds of billions” in economic losses.

Why the Court Said No

The court’s ruling hinged on two key points. First, IEEPA doesn’t explicitly allow tariffs. The 1977 law, used for sanctions against nations like Iran, permits the president to regulate imports during a “national emergency” but never mentions tariffs. Trump’s claim that trade deficits or drug trafficking justified tariffs stretched the law too far, the judges said. “The Constitution gives Congress, not the president, power to regulate commerce,” they wrote.

Second, the court rejected Trump’s “emergency” claims. The judges found no “unusual and extraordinary threat” in trade deficits, a decades-long issue. Tariffs aimed at fentanyl trafficking were also struck down, as they didn’t directly address the drug crisis but merely pressured foreign governments economically. “If the Tariff Orders are unlawful as to plaintiffs, they are unlawful as to all,” the panel declared, issuing a nationwide injunction.

Market Frenzy and Global Ripples

The ruling sparked immediate market reactions. On May 28, 2025, S&P 500 futures jumped 1.4% within hours. The U.S. dollar surged against the euro, yen, and Swiss franc, while Asian equities climbed. Importers, battered by tariff uncertainty, breathed relief, but confusion loomed over goods already at U.S. ports. “It’s chaos,” a Los Angeles port official told Reuters. “We don’t know what to charge.”

Globally, the decision weakened Trump’s leverage in trade talks with the EU, Japan, India, and others. Foreign governments, once pressured by tariff threats, now hold stronger cards. Scott Lincicome of the Cato Institute noted, “This gives trading partners significant new leverage.” China, paused in its tariff retaliation, may push harder in negotiations.

The Lawsuits: States and Businesses Fight Back

The legal battle began in April 2025. California Governor Gavin Newsom and Attorney General Rob Bonta filed a suit in San Francisco, arguing tariffs harmed the state’s economy. Twelve states, including Oregon and New York, followed with a case in the Court of International Trade, claiming “direct financial harm” from higher import costs. Separately, the Liberty Justice Center represented five small businesses—a New York wine importer, a Virginia educational kit maker, and others—hit hard by tariffs. “These tariffs are an existential threat,” said Ilya Somin, a lawyer for the businesses.

At least seven lawsuits challenged Trump’s tariffs, including one by the Blackfeet Nation and another by a Florida paper company. The court consolidated cases to the Court of International Trade, which has exclusive jurisdiction over trade disputes. The unanimous ruling by Judges Jane Restani (Reagan), Gary Katzmann (Obama), and a Trump appointee underscored bipartisan rejection of Trump’s overreach.

Trump’s Response: Defiance and Appeal

The Trump administration didn’t flinch. Hours after the ruling, the Justice Department filed an appeal to the U.S. Court of Appeals for the Federal Circuit, signaling a fight that could reach the Supreme Court. White House spokesman Kush Desai rejected the court’s authority: “It’s not for unelected judges to decide how to address a national emergency.” Deputy Chief of Staff Stephen Miller posted on X, “The judicial coup is out of control.”

Trump could pivot to other laws, like Section 232 of the Trade Expansion Act, used for auto and steel tariffs, which remain unaffected. But experts like Ilya Somin doubt another statute could replicate IEEPA’s sweeping scope. “They used IEEPA because it seemed to offer vast authority,” Somin told CNN.

What It Means Now

The ruling’s immediate impact is seismic. Importers face a 10-day window to adjust as tariffs are unwound, potentially slashing costs for businesses and consumers. California’s Newsom called it a “win for families and businesses.” However, the appeal could delay relief, and port confusion may disrupt supply chains. Globally, trading partners may slow negotiations, betting on further legal setbacks for Trump.

Economically, the decision could curb inflation fears tied to tariffs, which raised prices on everything from electronics to food. The National Retail Federation estimated tariffs would cost consumers $78 billion yearly. Politically, it’s a blow to Trump’s “America First” agenda, forcing a rethink of his trade strategy. If the Supreme Court takes the case, it could redefine executive power over trade.

For now, the ruling affirms Congress’s constitutional role in trade policy. “This is about checks and balances,” said Nevada Attorney General Aaron Ford. But with Trump’s appeal looming, the trade war’s fate hangs in the balance.

Voices from the Ground

Business owners cheered the ruling. A New York wine importer told AP News, “We were drowning in tariff costs. This gives us a lifeline.” In California, a farmer exporting almonds said, “Trump’s tariffs were killing our margins.” On X, verified accounts like @BBCBreaking reported, “U.S. court blocks Trump’s tariffs, citing overreach.” Sentiment on X was mixed—@nabilajamal_ called it a “big setback for Trump,” while @wungun celebrated, “Trade is back to normal!”

The Road Ahead

The Federal Circuit’s review could take months, and a Supreme Court battle may follow. Legal experts like Liza Goitein of the Brennan Center argue the case tests the “major questions doctrine,” requiring clear congressional authorization for sweeping executive actions. If upheld, the ruling could limit future presidents’ ability to bypass Congress on trade.

For now, businesses and consumers wait, markets fluctuate, and global trade partners recalibrate. The court’s decision has thrown Trump’s economic agenda into chaos, but his team’s defiance signals more battles ahead. Stay sharp with Ongoing Now 24.