A federal court in New York dealt a major blow to US President Donald Trump on Wednesday. It blocked his attempt to impose high tariffs on imports from almost every country.

Trump Overstepped Legal Boundaries

According to a three-judge panel, Trump went beyond his powers. He had used the 1977 International Emergency Economic Powers Act (IEEPA) to declare a national emergency. Then, he imposed tariffs under that claim.

As a result, the decision stated that Trump’s move broke with decades of U.S. trade policy. Moreover, the tariffs disrupted global trade, unsettled markets, and raised fears of inflation and recession.

Court Has Final Say on Trade Cases

The U.S. Court of International Trade oversees civil cases about trade. Its decisions can go to the Court of Appeals in Washington and, eventually, to the Supreme Court. Therefore, many experts believe the legal battle over Trump’s tariffs will reach the top court.

Which Tariffs Were Blocked?

Notably, the court struck down tariffs Trump imposed last month on most U.S. trading partners. It also blocked earlier tariffs on China, Mexico, and Canada.

On April 2, Trump introduced “reciprocal tariffs” of up to 50% on countries with which the U.S. had a trade deficit. At the same time, he placed 10% tariffs on almost all others. Although he paused the reciprocal tariffs for 90 days to give time for negotiation, he left the 10% baseline tariffs in place.

Furthermore, Trump claimed that trade deficits were a national emergency. By doing so, he tried to justify his actions under IEEPA without needing Congress.

Earlier, in February, he had already used the same law to impose tariffs on Canada, Mexico, and China. He argued that illegal immigration and drug trafficking at the U.S. border also counted as a national emergency.

Constitution Gives Congress Tariff Power

Importantly, the U.S. Constitution gives Congress the power to set tariffs. Over time, lawmakers allowed presidents more control. Trump took full advantage of that.

So far, at least seven lawsuits have challenged Trump’s tariffs. The court ruling combined two of them—one from five small businesses and another from twelve U.S. states.

However, the decision did not affect other Trump-era tariffs. Those include duties on foreign steel, aluminum, and cars, which were imposed using a different law that needed a Commerce Department review.

Court Rejected Nixon-Era Comparison

The Trump administration pointed to a 1971 move by President Richard Nixon, who used emergency powers to impose tariffs during a financial crisis. Nixon had used the 1917 Trading with the Enemy Act, which inspired parts of the later IEEPA.

Even so, the court dismissed the comparison. It said Trump’s tariffs went too far and did not fix the issues he raised. The states in the lawsuit argued that trade deficits are nothing new. In fact, the U.S. has had them for 49 straight years.

Trump’s Trade Agenda Faces Turmoil

As a result of the ruling, Trump’s trade strategy faces major uncertainty. Wendy Cutler, a former U.S. trade official, said, “The court’s decision throws the president’s trade policy into turmoil.” She added, “Partners negotiating hard during the 90-day tariff pause period may be tempted to hold off making further concessions to the US until there is more legal clarity.”

Similarly, companies may now rethink how they ship goods. Some might rush deliveries to avoid future tariffs if the ruling gets reversed on appeal.

Court Points to Limited Alternatives

Interestingly, the court noted that Trump could still use the Trade Act of 1974. But this law only allows 15% tariffs for 150 days. Also, it applies only to countries with which the U.S. runs large trade deficits.

Finally, Eswar Prasad, a professor at Cornell University, said, “The trade court’s ruling destroys the Trump administration’s rationale for using federal emergency powers to impose tariffs, which oversteps congressional authority and contravenes any notion of due process.” He also stated, “The ruling makes it clear that the broad tariffs imposed unilaterally by Trump represent an overreach of executive power.”