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A federal three-judge panel on Wednesday dealt a major blow to President Donald Trump’s trade agenda, ruling that he overstepped his legal authority by imposing sweeping tariffs on U.S. trading partners.
The U.S. Court of International Trade said Trump’s actions under the International Emergency Economic Powers Act (IEEPA) lacked clear legal limits and violated the statute’s intent. The ruling blocks a wide swath of tariffs, including those on Chinese imports and fentanyl-related products from Canada and Mexico.
“We read IEEPA’s provisions to impose meaningful limits on any such authority it confers,” the panel wrote in its decision, rejecting the idea that the law granted the president “unbounded tariff authority.”
Legal and Economic Ramifications
The ruling applies to two lawsuits challenging Trump’s tariffs: one led by attorneys general from Arizona and Oregon, and another brought by small businesses who said the measures hurt their bottom lines.
Arizona Attorney General Kris Mayes, a Democrat, praised the ruling, saying the tariffs “were poised to devastate our state’s economy.”
“I will continue to fight for affordability for Arizonans and against President Trump’s illegal abuses of power,” Mayes said.
Oregon Attorney General Dan Rayfield echoed that sentiment, calling the decision “a victory for working families and small businesses.”
“President Trump’s sweeping tariffs were unlawful, reckless, and economically devastating,” Rayfield said. “They triggered retaliatory measures, inflated prices on essential goods, and placed an unfair burden on American families, small businesses and manufacturers.”
White House Response and Appeal
The Trump administration responded swiftly, appealing the decision to the U.S. Court of Appeals for the Federal Circuit.
White House spokesperson Kush Desai defended the tariffs as essential to combat what Trump called a national emergency caused by persistent trade deficits.
“Trade deficits have decimated American communities, left our workers behind, and weakened our defense industrial base — facts that the court did not dispute,” Desai said. “It is not for unelected judges to decide how to properly address a national emergency.”
Market Reaction
Investors cheered the ruling, hopeful that a rollback in tariffs could ease trade tensions and lower consumer prices.
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Nasdaq futures jumped nearly 2%
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S&P 500 futures rose about 1.7%
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Dow Jones Industrial Average futures gained 520 points, or 1.2%
Since Trump’s sweeping tariff announcement on April 2, financial markets have experienced extreme volatility. At one point, Wall Street banks pegged the likelihood of a recession as high as 60%.
Despite the turbulence:
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The S&P 500 is now up 3.8% since April 2
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The Nasdaq has risen 8.5%
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The Russell 2000, which tracks smaller companies, is up 1%
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The Dow remains slightly negative
What’s Next?
The appeals process could take months, and legal experts say the Supreme Court may ultimately weigh in.
“This is one of the most significant checks on presidential trade authority we’ve seen in decades,” said Julian Ku, a constitutional law professor at Hofstra University. “It’s a reminder that even during a self-declared emergency, presidential power has limits.”
Meanwhile, the decision creates uncertainty for businesses and global trading partners as they wait to see which tariffs — if any — will remain in force.
