WASHINGTON, DC – MARCH 26: U.S. President Donald Trump displays a signed an executive order in the Oval Office of the White House on March 26, 2025 in Washington, DC. President Trump announced 25% tariffs on all foreign-made cars. (Photo by Win McNamee/Getty Images)
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by Dr Linda Yueh, London Business School
If upheld by the Supreme Court, the ruling by a federal appeals court could end the reciprocal tariffs that have altered global goods trade since April. But, the tariff war is unlikely to be over. Even if the blanket tariffs on all trading partners were deemed to be illegal, the President still has the power to impose double digit tariffs on some of the most significant traded goods in global trade.
The appeals court decision is consistent with longstanding US separation of powers
Using a 1977 legislation granting emergency economic powers (the International Emergency Economic Powers Act, IEEPA) as authority for structural tariffs was struck down by The US Court of Appeals for the Federal Circuit on Friday. Also, imposing tariffs to stop drugs (the reason given for Canada, Mexico, China) goes beyond the powers granted to the President. This ruling upholds the decision in May of the US Court for International Trade that the President doesn’t have authority to impose such across-the-board tariffs without the authorisation of Congress.
This is a longstanding principle that Congress makes laws, including trade laws. For instance, the “fast track” authority that had allowed the President to negotiate trade deals and Congress could only pass it or not without changes was not renewed in 2021. Now, the President must receive Congressional approval of the terms of any deal.
Among the White House arguments that were not persuasive included that the revocation of the tariffs will mean the US can’t afford to repay the trillions in tariff revenues committed by other countries. The actual amount collected is around $140 billion since April.
But the president can continue to impose section 232 tariffs
The President can still impose tariffs, however, under different legal authority. Section 232 tariffs are duties imposed on imported goods that threaten national security under the 1962 Trade Expansion Act. The sectoral tariffs on steel and aluminium, for instance, are imposed under this authority which allows tariffs to be imposed after a Commerce Department investigation concludes that there are threats to national security.
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This 50% tariff for other countries could potentially be expanded to cover other imports, such as pharmaceuticals. As of August, it covers copper. This is important given that the tariffs not just in magnitude but in terms of the amount of goods that have commodities such as copper and aluminium as inputs. For instance, some 400 UK products have steel or aluminium inputs which will be subject to this tariff set at a lower 25% due to the UK-US trade deal. Still, the coverage of the tariff is broad and economically damaging.
Impact on other countries and the world economy
It adds considerable uncertainty to ongoing trade negotiations and also to existing trade deals. If the reciprocal tariffs are deemed to be illegal, then the premise of trade deals made with the UK and other countries would come under question and potentially lead to re-opening those negotiations.
For businesses, this will mean more delays to shipping to the US as a number are likely to wait until the Supreme Court decision, which will continue to dampen international business activity and global economic growth.
What happens next?
The White House has indicated that it will appeal to the Supreme Court. The decision is effective as of October 14, allowing time for an appeal. They’d likely hear it given the significant impact of the appeals court decision.
The federal appeals court was divided 7-4 and it’s worth mentioning that of the Supreme Court’s nine justices, a majority were appointed by Republicans, including three by President Trump in his first administration. Court composition is of course not determinative.
What is certain is that the tariff wars will continue but in a different form and continue to generate significant uncertainty for businesses and the world economy.
Linda Yueh is Adjunct Professor of Economics at the London Business School; Fellow in Economics at St Edmund Hall, Oxford University; and the author of The Great Crashes and The Great Economists.