The US federal court’s ruling over the tariff, calling it “illegal”, came as a major setback for President Donald Trump. The court said that the Republican leader overstepped his authority when he declared trade deficits and border issues as “national emergencies” to justify sweeping tariffs he imposed on nearly every trading partner.Trump who has wielded tariffs as his favourite weapon in global trade battles, vowed to head toward Supreme Court. The bigger question is: what happens next?
Tariffs still in place (for now)
The US court of appeals for the federal circuit said that Trump went too far to justify his tariff weapon. The court upheld a May decision by a specialised federal trade court in New York, but allowed the Trump administration time to appeal to the Supreme Court.The decision was centred on the tariffs Trump imposed in April on almost all US trading partners and the levies he imposed before that on China, Mexico and Canada. Meanwhile, the court allowed the tariffs to remain in place while Trump appeals. That means businesses, consumers, and foreign governments are still living under the uncertainty of his trade war tactics — at least until the Supreme Court weighs in.
A $159 billion refund risk
US administration fears that if tariffs are ultimately struck down, then the Treasury could be forced to refund billions collected from importers. By July, tariff revenues had soared to $159 billion — more than expected. The justice department had warned that losing the case could mean “financial ruin” for the US — a dramatic warning that underscores how deeply tariffs now prop up federal revenue streams.“In such a scenario, people would be forced from their homes, millions of jobs would be eliminated, hardworking Americans would lose their savings, and even Social Security and Medicare could be threatened,” solicitor general D John Sauer and assistant attorney general Brett Shumate said in a letter to the court, warning of an apocalyptic doomsday if tariffs were struck down. “In short, the economic consequences would be ruinous, instead of unprecedented success,” the letter added.
Trump’s negotiating power weakens
The ruling threatens one of Trump’s most potent bargaining chips. He has used the threat of tariffs to strong-arm countries into lopsided trade deals — as seen with the EU, Japan, and the UK.Without this tool, experts say, foreign governments may stall on commitments, resist US demands, or even try to reopen old deals. Trump could find himself negotiating from a position of weakness, not dominance.
Supreme Court showdown looms
Trump has promised to take the case to the Supreme Court, blasting the appeals ruling as partisan and warning it would “literally destroy the United States of America” if upheld.“For many years, Tariffs were allowed to be used against us by our uncaring and unwise Politicians. Now, with the help of the United States Supreme Court, we will use them to the benefit of our Nation, and Make America Rich, Strong, and Powerful Again! Thank you for your attention to this matter,” Trump wrote in a post on his social media platform. The dissenting opinion in the appeals court gives him a potential legal opening: some judges argued that emergency tariff powers do not violate the Constitution. That split makes it almost certain the Supreme Court will take up the case.
Limited backup options on tariffs
- Even if the Supreme Court blocks his broad use of IEEPA, Trump still has fallback options — though far narrower:
- Trade Act of 1974: Allows tariffs up to 15% for 150 days on countries with big US trade deficits.
- Section 232 of the Trade Expansion Act of 1962: Lets presidents impose tariffs on “national security” grounds (used before on steel, aluminium, and autos). But this requires a commerce department investigation and isn’t instant.
These tools lack the sweeping, unilateral punch Trump has enjoyed — and could slow his ability to shock foreign governments into concessions.
The road ahead
In the short term, Trump’s tariffs stand. In the medium term, the Supreme Court will decide whether presidents truly have unchecked emergency powers to upend global trade.If Trump loses, America could face both a massive financial refund and a strategic reset in how it conducts trade negotiations.For now, US businesses, trading partners, and consumers remain trapped in limbo — waiting to see whether Trump’s “Liberation Day” tariffs mark a new era of presidential trade authority, or an overreach cut down by the courts.(with inputs from agencies)