In a major legal setback for the Trump administration, the US Court of International Trade has ruled that the administration’s sweeping global tariffs – introduced under the so-called “Liberation Day” strategy – were illegally imposed. The decision could unravel a significant portion of the tariff regime affecting imports from over 30 countries, including China, Canada, and Mexico.

The three-judge panel found that the administration misused the International Emergency Economic Powers Act (IEEPA), originally passed in 1977, as the basis for these tariffs. The court’s decision extends even to previous levies justified by national security concerns such as drug trafficking and border enforcement.

If implemented, the ruling could lift tariffs of 30% on Chinese goods, 25% on Canadian and Mexican imports, and 10% on goods from numerous other countries. However, the Trump administration has already announced plans to appeal the ruling, leaving the timeline and permanence of the change uncertain.

“These deficits have created a national emergency that has decimated American communities,” said White House spokesman Kush Desai, defending the tariffs as a necessary tool to address global imbalances.

The legal rebuke has thrown Trump’s broader tariff campaign into disarray, particularly as tariff revenue has become a key element in financing a proposed $3.8 trillion tax reform bill currently under Congressional review. In April alone, US importers paid a record $16.5 billion in tariffs.

Market Reaction & Business Uncertainty

Markets initially responded with optimism. S&P 500 futures rose by 1.1%, and Treasury yields climbed on hopes of easing trade tensions. Yet investors remain cautious as the long-term implications of the court’s ruling remain unclear.

Businesses – especially importers – are grappling with logistical and financial uncertainties. With thousands of containers en route from Asia, questions remain regarding refunds, timing, and applicability of the tariff rollbacks. 

International Response and Negotiation Dynamics

Key US trading partners such as Japan and Australia have expressed cautious optimism. Japanese officials stated they will examine the ruling closely, while Australia reaffirmed its stance against “unjustified” tariffs.

The decision may also complicate future trade negotiations. A tentative deal with the UK – which included a 10% US tariff on British imports – now faces legal ambiguity. Experts argue the ruling undermines the use of tariffs as leverage in trade talks.

This ruling marks a turning point in US trade policy, creating short-term volatility but potentially restoring legal boundaries around the use of emergency powers. For investors, businesses, and international partners, the days ahead will be filled with uncertainty, recalibration, and opportunity.