A US federal court has ruled that US president Donald Trump did not have the authority to impose ‘reciprocal’ tariffs on individual countries, blocking his planned tariffs. 

US president Donald Trump at a lecturn

The Court of International Trade has ruled Trump’s ‘reciprocal’ tariffs unlawful

The Court of International Trade has ruled that US president Donald Trump did not have the authority to impose ‘reciprocal’ tariffs on individual countries, and has blocked his planned tariffs on the likes of Canada, Mexico and China. 

The court invalidated all the tariffs the US has imposed under the International Emergency Economic Powers Act (IEEPA), which includes the tariffs on individual countries that Trump announced on ‘Liberation Day’, and the replacement global tariff of 10%. However, they change the tariffs on the automotive industry, including 25% tariffs on vehicle imports, 25% tariffs on car part imports, and 25% tariffs on steel and aluminium imports to the US. 

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The court ruled that the IEEPA law did not give Trump the unilateral power to enforce the ‘reciprocal tariffs’ based on trade deficits, stating: “The court does not pass upon the wisdom or likely effectiveness of the president’s use of tariffs as leverage. That use is impermissible, not because it is unwise or ineffective, but because the law does not allow it.”

Trump’s administration has been given 10 days to halt the tariffs – most of which had been paused already and replaced with a global 10% tariff put in place. But the administration responded almost instantly by filing a notice of appeal. It’s unclear how long the appeals process could take, with the potential of going to the Supreme Court. The pause that Trump had put on the tariffs at the beginning of April was set to last 90 days, meaning they would be expected to begin at the start of July unless trade negotiations were successful before then.

Which Trump tariffs have been ruled unlawful? 

The US tariffs that the federal court deemed unlawful include: 

  • The individual ‘reciprocal’ tariffs on specific countries, announced on ‘Liberation Day’
  • The 10% baseline global tariff that Trump imposed when he enacted a 90-day pause on ‘reciprocal’ tariffs 
  • The IEEPA tariffs of 25% on imports from Canada and Mexico that Trump implemented to tackle the alleged flow of illegal drugs into the US
  • The 20% tariffs on Chinese imports that Trump brought in in March (which later escalated into a trade war before landing on a 30% tariff on Chinese goods)

The ruling does not affect: 

  • The 25% tariffs on vehicle imports into the US
  • The 25% tariffs on automotive parts imports 
  • The 25% tariffs on steel and aluminium imports

Yet again, the tariff decision throws even more uncertainty on the automotive industry. If it goes all the way to the Supreme Court, it could take months until a decision is made, leaving OEMs and suppliers at a loss on optimal trade routes and whether or not to reorganise flows. Many carmakers have been adopting the “wait and see” approach with the reciprocal tariffs so far, while others have paused production and shipments.

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