U.S. Supreme Court Declares Tariffs Illegal in Landmark Ruling

President Donald Trump holds a chart as he delivers remarks on reciprocal tariffs during an event in the Rose Garden entitled "Make America Wealthy Again" at the White House in Washington, DC, on April 2. Trump geared up to unveil sweeping new "Liberation Day" tariffs in a move that threatens to ignite a devastating global trade war.

Washington, D.C. – A federal appeals court has struck a major blow to former President Donald Trump’s trade policies, ruling on August 29, 2025, that most of his sweeping tariffs on countries like China, Canada, and Mexico are illegal. The 7-4 decision by the U.S. Court of Appeals for the Federal Circuit found that Trump overstepped his authority under the International Emergency Economic Powers Act (IEEPA), which he used to justify the tariffs. The ruling, which delays enforcement until October 14, 2025, to allow for a potential Supreme Court appeal, could reshape U.S. trade policy and spark billions in refunds for importers.

The court’s decision targets Trump’s “reciprocal” tariffs imposed in April 2025, which set a 10% baseline levy on nearly all U.S. trading partners, with higher rates up to 50% on countries like India and Brazil. It also voids tariffs on China, Canada, and Mexico, justified by Trump as necessary to curb alleged fentanyl trafficking and trade imbalances. The court ruled that IEEPA, a 1977 law typically used for sanctions or asset freezes, does not grant the president authority to impose tariffs, as this power resides solely with Congress under the U.S. Constitution. “The core Congressional power to impose taxes such as tariffs is vested exclusively in the legislative branch,” the court stated.

The ruling has raised alarms about economic fallout. Trump’s tariffs, affecting roughly 69% of U.S. goods imports, generated $142 billion in revenue by July 2025, more than double the previous year’s amount. Economists warn that the tariffs have fueled inflation and increased costs for U.S. businesses and consumers. If the Supreme Court upholds the ruling, importers may seek refunds, potentially costing the government billions and triggering a “logistical nightmare” for the U.S. Customs and Border Protection. However, tariffs on steel, aluminum, and autos, imposed under separate legal authorities like Section 232 of the Trade Expansion Act, remain unaffected.

Trump, vowing to appeal to the Supreme Court, called the decision a “disaster” that could “literally destroy the United States of America.” He argued on Truth Social that the tariffs are essential to protect American workers and manufacturing, claiming they would make the U.S. “rich, strong, and powerful again.” The White House, backed by Commerce Secretary Howard Lutnick and Treasury Secretary Scott Bessent, warned that striking down the tariffs could disrupt trade agreements with the EU, Japan, and others, risking “financial ruin” and diplomatic embarrassment. Critics, including 12 Democratic-led states and small U.S. businesses, hailed the ruling as a check on executive overreach.

The decision casts uncertainty over global trade. The World Trade Organization (WTO) may see increased disputes if the tariffs are rescinded, as trading partners like the EU and Brazil have already introduced retaliatory measures. Economists, such as Josh Lipsky of the Atlantic Council, suggest the ruling puts Trump’s economic agenda on a “collision course” with the Supreme Court, which has a 6-3 conservative majority, including three Trump appointees. However, the court’s recent skepticism of broad executive powers under the “major questions doctrine” could complicate Trump’s case.

If the Supreme Court upholds the ruling, it could limit presidential tariff powers, pushing future administrations toward more restricted tools like the Trade Act of 1974, which caps tariffs at 15% for 150 days. Alternatively, a reversal could embolden presidents to use IEEPA more aggressively, reshaping trade governance. For now, the tariffs remain in place, leaving businesses and global markets in limbo as the legal battle heads toward a pivotal Supreme Court showdown.

The ruling also prompts broader questions about U.S. trade policy. Experts like Wolfgang Alschner from the University of Ottawa argue it raises a constitutional debate over the balance of power between the presidency and Congress. Importers are advised to prepare for continued uncertainty, as the outcome could affect supply chains, trade deals, and inflation worldwide.