A federal appeals court has ruled that most of President Donald Trump’s tariffs on imports to the United States are unlawful, throwing into doubt the signature economic policy of his second term.
The 7-4 ruling, which found that the president does not have the power to enact such sweeping tariffs on other nations, comes at a pivotal moment in trade talks sparked by the policy. Treasury Secretary Scott Bessent had aimed to wrap up negotiations with international trading partners by Labor Day, a target that will now be missed.
Trump’s so-called “Liberation Day” announcement of the aggressive tariff plan sparked a volatile five months in global trade as America’s trading partners introduced reciprocal measures, and American consumers faced higher bills for imported products.
Read More: The Chaotic, Fantastical World of Donald Trump’s Tariffs
The court said on Friday that the tariffs can remain in effect for now to allow the government time to appeal the decision.
Trump’s sweeping tariffs have been a defining feature of his presidency, although the rates and targets of these tariffs have frequently shifted, causing difficulties for businesses.
Still, Trump has been staunch in his belief that his tariffs—especially on major trading partners like India—will eliminate trade deficits, end what he calls unfair trading terms across the world, and bolster American jobs.
Here’s what to know.
What the ruling says
The majority opinion ruled that Trump’s tariffs are beyond the authority granted to him under the International Emergency Economic Powers Act (IEEPA) that he invoked to implement them, and beyond his authority as head of the executive branch.
The ruling said the tariffs “assert an expansive authority that is beyond the express limitations.”
“Given these considerations, we conclude Congress, in enacting IEEPA, did not give the President wide-ranging authority to impose tariffs of the nature” that Trump levied, the ruling reads.
They add that tariffs are not usually an executive power: “Tariffs are a core Congressional power.”
The decision echoes a May ruling by the U.S. Court of International Trade, which also said that Trump’s tariffs exceeded the limits of the IEPPA.
The IEEPA had not been used by a president to impose tariffs before Trump. It has been utilized for economic sanctions, and the act gives the president the power to respond to “unusual and extraordinary” threats during national emergencies, but the court said this does not include tariffs.
“The statute bestows significant authority on the President to undertake a number of actions in response to a declared national emergency, but none of these actions explicitly include the power to impose tariffs, duties, or the like, or the power to tax,” the ruling said.
What tariffs does the ruling affect?
The ruling specifically targeted Trump’s “reciprocal tariffs” unveiled on April 2, a date described by Trump as “Liberation Day,” in addition to “trafficking tariffs”—the levies announced on Feb. 1 against China, Canada, and Mexico by Trump as he argued that these nations were not doing enough to stop fentanyl and drugs from entering the United States.
“Both the Trafficking Tariffs and the Reciprocal Tariffs are unbounded in scope, amount, and duration,” the majority ruled.
Tariffs that Trump imposed using different justifications, including those on steel, copper and aluminum, will remain unaffected by the rulings.
What happens now?
The ruling will not take effect until Oct. 14, giving the Trump Administration over a month to challenge it in court.
This ruling, though, is just one of over half a dozen lawsuits targeting Trump’s use of the IEEPA to justify his foreign trade policy.
Trump signaled in a Truth Social post that the ruling will now be moving to the Supreme Court for a final decision on the legality of Trump’s tariffs and his expansion of executive power.
“ALL TARIFFS ARE STILL IN EFFECT!”, Trump posted on Truth Social on Friday after the ruling came down. He called the court “highly partisan” and said that if the tariffs were taken away, “it would be a total disaster for the Country.”
“We should all remember that TARIFFS are the best tool to help our Workers, and support Companies that produce great MADE IN AMERICA products,” he continued.
“Tariffs were allowed to be used against us by our uncaring and unwise Politicians,” Trump wrote. “Now, with the help of the United States Supreme Court, we will use them to the benefit of our Nation, and Make America Rich, Strong, and Powerful Again!”
What does this mean for the economy?
The effects of Trump’s tariffs have already been felt by consumers over the past few months, and as they remain in place, those effects will continue to expand their reach.
Although Trump claims that his policies will eventually help American consumers, price rises are rocking shoppers as the U.S. wholesale price index jumped last month. Many larger retailers, including Walmart and BestBuy, have already begun to raise their prices in response to tariffs, and they say more are on the way as the impact settles in.
Furthermore, as news of the ruling hits businesses, their desire for consistency only gets farther and farther away as they await a potential lasting ruling that could decide the fate of Trump’s tariffs for years to come.
