Trump’s tariffs to remain in effect after appeals court grants stay

A FEDERAL appeals court temporarily reinstated the most sweeping of President Donald Trump’s tariffs on Thursday, a day after a US trade court ruled that Trump had exceeded his authority in imposing the duties and ordered an immediate block on them.

The United States Court of Appeals for the Federal Circuit in Washington said it was pausing the lower court’s ruling to consider the government’s appeal, and ordered the plaintiffs in the cases to respond by June 5 and the administration by June 9.

Wednesday’s surprise ruling by the US Court of International Trade had threatened to kill or at least delay the imposition of Trump’s so-called Liberation Day tariffs on imports from most US trading partners and additional tariffs on goods from Canada, Mexico and China. The latter was related to his accusation that the three countries were facilitating the flow of fentanyl into the US.

The trade court’s three-judge panel ruled that the Constitution gave Congress, not the president, the power to levy taxes and tariffs, and that the president had exceeded his authority by invoking the International Emergency Economic Powers Act, a law intended to address threats during national emergencies.

Senior Trump administration officials had said they were undeterred by the trade court’s ruling, saying they expected either to prevail on appeal or employ other presidential powers to ensure the tariffs go into effect.

Trump has used the threat of charging US importers costly tariffs for goods from almost every other country in the world as leverage in international trade talks, a strategy the trade court’s ruling would upend. The trade court ruling had not interfered with any negotiations with top trading partners that are scheduled in the days ahead, Trump’s administration said.

Trump himself wrote in a statement shared on social media that he hoped the US Supreme Court would “reverse this horrible, Country threatening decision” of the trade court, while lambasting the judicial branch of government as anti-American.

“The horrific decision stated that I would have to get the approval of Congress for these Tariffs,” Trump wrote on Thursday evening. “If allowed to stand, this would completely destroy Presidential Power — The Presidency would never be the same! This decision is being hailed all over the World by every Country, other than the United States of America.”

Many US trading partners offered careful responses. The British government said the trade court’s ruling was a domestic matter for the US administration and noted it was “only the first stage of legal proceedings.” Both Germany and the European Commission, the European Union’s executive arm, said they could not comment on the decision.

Canadian Prime Minister Mark Carney said the trade court’s finding was “consistent with Canada’s longstanding position” that Trump’s tariffs were unlawful.

Financial markets, which have whipsawed in response to the twists and turns in Trump’s chaotic trade war, reacted with cautious optimism to the trade court ruling, though gains in stocks on Thursday were largely limited by expectations that the court’s ruling faced a potentially lengthy appeals process.

Indeed, analysts said broad uncertainty remained regarding the future of Trump’s tariffs, which have cost companies more than $34 billion in lost sales and higher costs, according to a Reuters analysis.

Some sector-specific tariffs, such as on imports of steel, aluminum and automobiles, were imposed by Trump under separate authorities on national security grounds and were unaffected by the ruling.

The Liberty Justice Center, the nonprofit group representing five small businesses that sued over the tariffs, said the appeals court’s temporary stay was a procedural step.

Jeffrey Schwab, senior counsel for the center, said the appeals court would ultimately agree with the small businesses that faced irreparable harm of “the loss of critical suppliers and customers, forced and costly changes to established supply chains, and, most seriously, a direct threat to the very survival of these businesses.”

A separate federal court earlier on Thursday also found that Trump overstepped his authority in using the International Emergency Economic Powers Act for what he called reciprocal tariffs of at least 10% on goods from most US trading partners and for the separate 25% levies on goods from Canada, Mexico and China related to fentanyl.

That ruling was much narrower, however, and the relief order stopping the tariffs applied only to the toy company that brought the case. The administration has appealed that ruling as well.

UNCERTAINTY PERSISTS
Following a market revolt after his major tariff announcement on April 2, Trump paused most import duties for 90 days and said he would hammer out bilateral deals with trade partners.

But apart from a pact with Britain this month, agreements remain elusive, and the trade court’s ruling on the tariffs and the uncertainty of the appeals process may dissuade countries like Japan from rushing into deals, analysts said.

“Assuming that an appeal does not succeed in the next few days, the main win is time to prepare, and also a cap on the breadth of tariffs — which can’t exceed 15% for the time being,” said George Lagarias, chief economist at Forvis Mazars international advisers.

The trade court ruling would have lowered the overall effective US tariff rate to about 6%, but the appellate court’s emergency stay means it will remain at about 15%, according to estimates from Oxford Research. That is the level it has been since Trump earlier this month struck a temporary truce that reduced punishing levies on Chinese goods until late summer. By contrast, the effective tariff rate had been between 2% and 3% before Trump returned to office in January.

Trump’s trade war has shaken makers of everything from luxury handbags and sneakers to household appliances and cars as the price of raw materials has risen.

Drinks company Diageo and automakers General Motors and Ford are among those that have abandoned forecasts for the year ahead.

Non-US companies including Honda, Campari, Roche and Novartis have said they are considering moving operations or expanding their US presence to mitigate the impact of tariffs. — Reuters