A federal appeals court this week dealt a significant legal blow to the administration’s most expansive tariff measures, ruling that the president exceeded his authority in imposing sweeping, economy-wide duties under emergency powers. The decision voids much of the so-called “reciprocal” tariff package — including a baseline duty that applied to most U.S. trading partners and a series of higher, country-specific rates — while leaving intact certain sectoral levies and creating a temporary window for the government to seek further review. The ruling reshapes the legal landscape for U.S. trade policy, raises the prospect of refunds for importers, and highlights which countries faced the steepest penalties.

What the appeals court struck down — and the legal reasoning

The appeals court concluded that the International Emergency Economic Powers Act (IEEPA), the 1977 statute the White House relied upon, does not grant the president authority to impose tariffs on imports. In a majority opinion, judges emphasized that the Constitution vests the power to levy taxes and duties in Congress, and that Congress had not expressly delegated the specific tariff-imposing authority to the executive in the text or legislative history of IEEPA. The court therefore vacated the proclamations and orders that created the broad baseline duty and the “reciprocal” structure tied to various countries.

At the heart of the decision was a separation-of-powers argument: emergency national-security and economic tools can be powerful, but they do not supplant the core congressional power to tax and to set trade policy unless Congress clearly says so. The court found that the administration’s use of IEEPA to justify economy-wide tariffs — including measures framed as responses to trade deficits or alleged trafficking concerns — exceeded the statute’s intended scope. Though the appellate panel allowed the levies to remain in place temporarily to permit an appeal to the Supreme Court, its ruling removed the statutory foundation for those duties unless the high court or Congress provides a different legal basis.

Which levies remain in force (for now) and why

The decision did not dismantle every element of the administration’s trade posture. Sector-specific tariffs imposed under other legal authorities were not at issue in this litigation and remain in force. Most notably, duties imposed under Section 232 of the Trade Expansion Act — long used for steel and aluminum measures grounded in national-security findings — have a separate statutory basis and a more extensive administrative record, making them far less vulnerable to the particular legal challenge that targeted IEEPA proclamations.

Likewise, certain tariffs that trace their authority to prior statutory or regulatory processes were not struck down by the appeals court because they rest on different legal footing. The appellate panel did, however, permit the IEEPA-based levies to continue temporarily while the administration seeks emergency relief, meaning importers and trading partners face elevated costs for the immediate period even though the measures were found unlawful. That stay reduces immediate economic disruption but leaves open the risk of large refund claims if courts ultimately confirm the vacatur.

Which countries were hit hardest — why rates varied and who bore the brunt

The tariff architecture rolled out earlier in the year combined a baseline duty for most partners with higher, country-specific rates intended to be “reciprocal” or punitive. While many countries faced a baseline increase, a smaller group saw dramatically higher duties — in several cases bands as high as 30%–50% applied to certain product categories.

Major emerging economies and a number of middle-income countries were among those assigned the highest rates under the proclamations. Countries that received the steepest targeted duties included India and Brazil, which faced some of the upper-end bands, while others — including China, Canada and a set of Southeast Asian and African suppliers — were subject to graduated increases across specific product lines. The variation reflected a mix of trade-policy objectives: some rates were pitched as reciprocation for perceived market access barriers, others were framed as punishment tied to bilateral disputes or alleged regulatory failures.

For exporters to the U.S., the difference between the 10% baseline and a 30%–50% targeted rate was dramatic, effectively reshaping supply-chain economics for affected product lines. Those higher bands provoked immediate diplomatic concern and, in several capitals, sharp responses from trade ministries wary of disproportionate economic harm. Businesses reliant on trade with the United States scrambled to assess cost impacts, consider rerouting supply chains, or accelerate shipping ahead of effective dates.

Legal and practical fallout: refunds, alternative routes and policy choices

If the appellate ruling is ultimately upheld, importers who paid IEEPA-based levies could seek reimbursement, creating potential fiscal exposure for the government. The prospect of refunds — and the administrative burden of reclaiming duties — will be central to the litigation and to future legislative or executive responses.

The decision also narrows the administration’s unilateral toolkit for imposing broad tariffs. Other statutes, such as the Trade Act of 1974, provide mechanisms to adjust tariffs but typically include explicit limits — caps on rates, shorter durations, or procedural requirements — that would constrain the scope and permanence of any future levies. That means broad, long-running, executive-driven tariffs could only be sustained through new congressional action or by relying more heavily on sector-specific authorities with clearer statutory bases.

In the short term, the appellate stay keeps many tariffs in place while the administration appeals, imposing immediate costs on importers and buyers. For markets and firms, this creates planning challenges: businesses must weigh current elevated costs against the possibility of eventual reimbursement but cannot bank on the outcome. For trading partners, the legal setback reduces the likelihood that the IEEPA route will be a durable model for sweeping unilateral tariffs, but it does not immediately erase the commercial consequences of months of heightened duties.

Political and economic implications

The appeals court decision carries consequences beyond legal doctrine. Domestically, it reaffirms the judiciary’s role in policing the boundary between executive action and congressional prerogative on fiscal and trade matters. Politically, the ruling can be expected to fuel debate over whether Congress should provide clearer statutory authority for emergency trade measures — or whether lawmakers should assert control by crafting bespoke tariffs or trade remedies through the legislative process.

Internationally, the temporary continuation of duties during appeals sustains short-term disruptions to exporters and supply chains even as the legal posture weakens. For countries that bore the brunt of the highest rates, the court’s decision offers a potential path back to normalcy if the nullification is ultimately finalized. Yet the diplomatic and commercial fallout of months of uncertainty may linger: firms shifted sourcing, shipments were re-routed, and buyers faced higher input costs that can persist beyond a simple reversal of duty rates.

Looking ahead, the vacancy created by the opinion narrows but does not eliminate avenues for unilateral action. The administration could seek to impose more targeted measures under established statutory frameworks that include procedural checks, or Congress could choose to draft a new law that explicitely authorizes certain emergency trade responses. Until then, courts will remain a central battleground for disputes about the reach of executive power in trade — and businesses and trading partners will have to navigate a period of legal and economic uncertainty while watching whether the Supreme Court, or lawmakers on Capitol Hill, reframe the rules of the road.

(Adapted from CNBC.com)

Categories: Economy & Finance, Geopolitics, Regulations & Legal