This week, an obscure trade court dropped a bombshell ruling: President Trump did not have the authority to issue sweeping tariffs under a 1977 law. The government has appealed the court’s decision. WSJ’s James Fanelli and Gavin Bade dig into the ruling and what it could mean for the future of Trump’s trade agenda. Annie Minoff hosts. Further Listening: The Tariff Trade Off: Jobs vs. Higher Prices A Tariff Loophole Just Closed. What That Means for Online Shopping Sign up for WSJ’s free What’s News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices
Chapter 1: What is the U.S. Court of International Trade?
There's a squat, boxy building in New York City, a relatively unimposing courthouse tucked into Lower Manhattan. It's called the U.S. Court of International Trade. And you'd be forgiven if you've never heard of it. Neither had our legal reporter, James Finelli.
You know what? I had not heard of it until these tariffs and potential legal challenges to them started percolating. A trade lawyer I spoke to about this court said that, you know, most people graduating law school had probably never heard of it.
The court is obscure, but when it comes to matters of trade, it's powerful.
This court has national jurisdiction. So that means that, you know, it can hear cases all over the country involving any kind of trade dispute. And when they issue a decision, it can affect everything.
And this week, it did.
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Chapter 2: Why is the recent trade court ruling significant?
Tonight, a three-judge panel ruling that the emergency declared by President Trump to impose those sweeping tariffs, quote, exceeds any tariff authority delegated to the president.
The trade court ruling is a big deal. That's a big deal. If this ruling stands, then Trump will have to find a new way to impose tariffs. He wouldn't be able to declare a national emergency and then enact these broad levies around the world.
Welcome to The Journal, our show about money, business, and power. I'm Annie Minoff. It's Friday, May 30th. Coming up on the show, how an obscure court upended Trump's trade agenda. On April 2nd, Trump imposed his Liberation Day tariffs and kicked off a global trade war.
The president announced goods from every nation we trade with will be subject to import taxes. A 34% tax on imports from China. That's on top of the 20% tariff already imposed. 24% on Japan and 20% on the European Union.
He's also announcing 10% at least tariffs on all countries.
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Chapter 3: How did Trump justify imposing tariffs?
How soon after Trump began imposing sweeping tariffs did people in your world, the legal world, start asking, wait a second, can he do that?
I think they started asking that question fairly quickly. And the question that they focused on was whether he had the full reach of the Constitution to be allowed to make these sweeping tariffs.
Typically, Congress regulates tariffs. But in this case, Trump argued that he could do it. His administration invoked a 1970s-era law, the International Emergency Economic Powers Act, IEPA for short.
And he said that I can impose these sweeping tariffs like on basically every nation in the world because there's this emergency happening where the U.S. has a trade deficit and it's affecting our supply chain. It's affecting our domestic manufacturing and it's affecting our military.
Chronic trade deficits are no longer merely an economic problem. They're a national emergency that threatens our security.
When President Trump invoked the Emergency Economic Powers Act, had we ever seen anything like that before? How new was that?
It was brand new. This law had never been used in this way before. No previous president had ever tried to impose tariffs under AIPA.
It was a first, and the move raised eyebrows. Some academics and legal groups started looking into whether the tariffs could be challenged in court. That led to a few lawsuits, including one brought by a libertarian nonprofit law firm called the Liberty Justice Center. That suit brought together a group of small businesses to sue the government.
There was five in total, including a New York-based wine importer. There was a fishing tackle retailer in Pennsylvania. There was a women's cycling apparel brand based in Vermont, a Utah manufacturer of plastic pipes, and a company called MicroKits, which was a Virginia-based maker of educational electronic kits.
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Chapter 4: What were the arguments made by the plaintiffs against Trump's tariffs?
Yes, you're right. And they chose those five because I think all those five businesses, they had stuff that they were importing from like over 30 different countries around the world.
So they could really cover their ground with these five companies.
So they could cover their ground. That's right. Yes.
A few weeks ago, James visited the Court of International Trade, that obscure court in lower Manhattan. He was there to watch as the plaintiffs in the Trump administration made their case before a panel of three judges. And what argument did those five businesses make?
The plaintiffs argued that this law, that Trump's use of AIPA, had never been used before by any other president. It was the first time that any president had ever said that, oh, I can impose tariffs on another country based on this emergency that I believe is happening. They said that the IEPA does not grant any kind of ability for the president to impose tariffs.
That's the job of Congress, and Congress created this law, and they argued that there was no language in that law that said that Trump had the ability to impose tariffs.
— The businesses also disputed Trump's claim that the country is in the middle of an emergency.
The plaintiff's argument was that this wasn't an emergency, there's been a trade deficit for decades, and this definitely wasn't some unusual and extraordinary threat.
And what did the government argue in response to that?
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Chapter 5: What was the government's defense of Trump’s tariff powers?
But there was also a larger argument that the government wanted to make, an argument about executive power.
The main argument for the Justice Department was that Trump had this power to unilaterally impose these tariffs and that the court had a very limited role in even reviewing his use of that authority. They said that the court didn't have any right to decide whether or not Trump's emergency was a real emergency or not. And that was something that was left up for him to decide and that Congress,
could potentially review his actions, but it wasn't the court's role.
That seems like a hard argument to make to a bunch of judges that you have no place here.
It's a hard argument to make. And, you know, I think even during some of the hearings, they were very skeptical of that argument and were even wondering aloud, like, well, what role should the court have? The judges were also a little skeptical about, you know, how do you measure what is a national emergency?
And, you know, one of the judges, I think maybe she did it in a tongue-in-cheek kind of manner, she posed this scenario. What about if there was this shortage of peanut butter? So she wanted to know, like, where the president's— Yeah, what's the line between, you know, a national emergency and just, you know, some kind of inconvenience to some people?
The government's lawyer responded that IEPA set out clear boundaries for exercising presidential power. The court issued its ruling on Wednesday night. Its verdict? Trump did not have the authority to impose tariffs under the Emergency Economic Powers Act.
In response to the ruling, a White House spokesman said, quote, it is not for unelected judges to decide how to properly address a national emergency, unquote. Lawyers for the Trump administration immediately appealed the court's decision. They also requested a stay that would keep the tariffs in place temporarily.
Yesterday, they got that stay, which will remain in place as the case works its way through the courts.
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Chapter 6: What are the potential implications of the court's decision?
Well, the administration has said it doesn't impact them at all, right? That the trading partners are calling up and still eager to do deals. We've heard Jameson Greer, the trade representative, say that.
All the other countries I'm dealing with in negotiations are treating this as just kind of a bump in the road rather than any fundamental change. So I feel pretty confident about the case.
That contrasts a little bit with their position in court, their actual court filings. In their petition for the stay, the administration was very clear that they thought that putting these tariffs on hold would undermine their leverage in all of these trade talks. They said really jeopardize everything that they were trying to do. So they're kind of talking out of both sides of their mouth here.
So was the administration right in that court filing? Like, does this decision make it less likely that countries will want to make a deal?
I do think a number of countries will still be eager to do a deal with the US because maybe they will feel that they have a little more leverage in these negotiations now. And I think that they see that they may have a little bit more time as well. All of these court proceedings kind of throw into question the deadline that Trump had set to complete all of these trade negotiations.
That was actually on July 9th. So if you're going to do a deal with the US, you just got a little bit more breathing room and you got a little bit of leverage in these negotiations. Maybe Trump can't drive as hard of a bargain as he would have otherwise.
The Trump administration will continue to pursue the case through the courts. But according to people Gavin's talked to, the administration is also working on a potential Plan B. This plan wouldn't rely on IEPA. It would rely on yet another law from the 1970s, the Trade Act of 1974.
It's a different law and actually a much more commonly used law, both by the Trump administration in its first term and numerous presidents. This is a really tried and tested law. And so the plan is kind of twofold. The first part would be utilizing what's called Section 122 of the Trade Act.
This section, the first part of the plan, allows the president to put tariffs in place for 150 days.
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