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In a pivotal decision on May 28, 2025, the U.S. Court of International Trade invalidated former President Donald Trump's expansive "Liberation Day" tariffs, asserting that he exceeded his authority under the International Emergency Economic Powers Act (IEEPA). This ruling not only halts the collection of these tariffs but also reinforces the constitutional principle that trade policy falls under congressional jurisdiction.

Background on the 'Liberation Day' Tariffs

On April 2, 2025, President Trump announced a sweeping tariff regime, imposing a baseline 10% duty on a broad range of imports, with certain goods facing tariffs as high as 84%. These measures targeted numerous countries, including key trading partners like Canada, Mexico, and China. The administration justified these tariffs by declaring a national economic emergency, citing persistent trade deficits and concerns over drug trafficking.

Legal Challenge and Court Findings

The tariffs faced immediate legal challenges from a coalition of five American businesses and 12 state attorneys general, including Oregon. Plaintiffs argued that the tariffs were economically damaging and unlawfully bypassed Congress.

The three-judge panel unanimously agreed, stating:

The IEEPA does not grant the President authority to impose tariffs to rectify trade imbalances or combat drug trafficking.

Declaring a national emergency based on long-standing trade deficits does not meet the statutory criteria of an "unusual and extraordinary threat."

The executive orders represented an overreach of presidential power, infringing upon Congress's exclusive authority to regulate trade.

Consequently, the court issued a permanent injunction against the enforcement of these tariffs and mandated that U.S. Customs and Border Protection cease their collection.

Market Reaction and Economic Implications

Financial markets responded positively to the ruling. The Dow Jones Industrial Average futures surged by 500 points, while the S&P 500 and Nasdaq-100 also posted significant gains. Analysts interpret this as a restoration of predictability in trade policy, which had been disrupted by the tariffs.

However, the ruling introduces uncertainty into ongoing trade negotiations with international partners. Countries affected by the tariffs may seek to renegotiate terms, and the U.S. government's approach to trade policy will likely undergo scrutiny and adjustment.

Administration's Response and Future Outlook

The Trump administration has announced plans to appeal the decision to the U.S. Court of Appeals for the Federal Circuit. White House spokesperson Kush Desai defended the tariffs, stating that they addressed "nonreciprocal treatment" of the U.S. by foreign nations, which contributed to trade deficits harming American communities and industries.

Despite the appeal, legal experts suggest that the administration may explore alternative avenues to impose tariffs, such as invoking Section 232 (national security) or Section 301 (unfair trade practices) of the Trade Act. However, these routes would require substantial evidence and procedural compliance.

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The court's decision marks a significant check on executive power, reaffirming the constitutional role of Congress in trade regulation. As the legal process unfolds, businesses and international partners will closely monitor developments, anticipating potential shifts in U.S. trade policy and their global economic implications.

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