Trump Tariffs Ruled Illegal: What It Means for U.S. Trade and Consumers

Court Blocks Trump's Sweeping Tariffs

On May 28, 2025, the U.S. Court of International Trade ruled that President Donald Trump exceeded his authority by imposing broad tariffs on imports from trade partners. The court determined that the Constitution grants Congress, not the president, the exclusive power to regulate international commerce, rejecting the use of the International Emergency Economic Powers Act (IEEPA) for such tariffs. The court's decision delivered a blow to Trump's tariff-centered trade policy, which he used to pressure foreign partners and address the U.S. trade deficit.

Economic Impact of the Tariffs

The Penn Wharton Budget Model projected that Trump's tariffs, as of April 8, 2025, would reduce long-run GDP by about 6% and wages by 5%. A middle-income household faces a $22,000 lifetime loss. These losses are twice as large as a revenue-equivalent corporate tax increase from 21% to 36%, an otherwise highly distorting tax.

Market Reactions

The court's decision buoyed global markets, with U.S. stock futures and regional indices in Asia rallying. Export-heavy markets such as Japan and South Korea saw strong gains, while commodities like crude oil rose but gold declined. The ruling favors trade stability, reducing fears of escalating tariffs, although the White House plans to appeal.

What's Next?

The Trump administration has filed an appeal and may take the case to the Supreme Court. While the court's decision invalidated tariffs imposed under the IEEPA, other tariffs, such as those on steel and aluminum under Section 232 of the Trade Expansion Act, remain in effect. The administration may explore alternative legal avenues to implement its trade policies.

Conclusion

The federal court's ruling marks a significant check on executive power in trade policy. While some tariffs remain, the decision introduces uncertainty into the administration's trade agenda and offers relief to businesses and consumers affected by the tariffs. The outcome of the appeal will be closely watched by stakeholders across the economy.