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NEW YORK, N.Y.—The United States Court of International Trade (CIT) on May 28 delivered a significant setback to President Donald J Trump’s trade agenda, ruling that his sweeping global tariffs were unlawful. The decision, now under appeal, threatens the financial foundation of Trump’s “Big Beautiful Bill,” a plan combining tariffs with tax cuts that is now in the U.S. Senate after passing the House by a single vote on May 22.

White House spokesperson Kush Desai released the following statement in response to Wednesday’s ruling: ““Foreign countries’ nonreciprocal treatment of the United States has fueled America’s historic and persistent trade deficits. These deficits have created a national emergency that has decimated American communities, left our workers behind, and weakened our defense industrial base — facts that the court did not dispute. It is not for unelected judges to decide how to properly address a national emergency. President Trump pledged to put America First, and the Administration is committed to using every lever of executive power to address this crisis and restore American Greatness.”

A three-judge panel, drawn from 12 active judges of the U.S. Court of Appeals for the Federal Circuit in Washington, D.C.—none of whom were appointed by Trump—will now hear the administration’s appeal. If the Federal Circuit affirms the CIT ruling, the Trump administration could petition the U.S. Supreme Court to then hear the case.

Governor Bob Ferguson was pleased with the CIT ruling taking to X: “These tariffs would have significantly harmed Washingtonians and Washington businesses, as we told the court in our ‘friend of the court.’”

U.S. Senator Maria Cantwell (D-WA), ranking member of the Senate Committee on Commerce, Science, and Transportation and senior member of the Senate Finance Committee, also praised the CIT’s ruling starting in a release:“I am glad the Court of International Trade unanimously recognized that the President exceeded his authority. We need trade to flow through our ports.”

Why the CIT Ruled Against Trump

Trump invoked the IEEPA as part of his broader “Liberation Day” economic strategy to fund tax cuts and renegotiate trade deals by declaring a national emergency, citing trade deficits, drug inflows from Canada, Mexico, and China, and illegal immigration as “unusual and extraordinary threats.”

The three-panel CIT decision was led by Judges Gary S. Katzmann (Obama appointee), Timothy M. Reif (Trump appointee), and Jane A. Restani (Reagan appointee). Their ruling struck down most of Trump’s imposed tariffs, including global reciprocal tariffs,  a 10% baseline levy on most imports, 25% tariffs on Canada and Mexico, and 30% on China, ruling that these exceeded the president’s authority under the International Emergency Economic Powers Act (IEEPA) of 1977. However, tariffs under Section 232 of the Trade Expansion Act (e.g., on autos, steel, and aluminum) remain in place.

“The question in the two cases before the court is whether the International Emergency Economic Powers Act of 1977 (“IEEPA”) delegates these powers to the President in the form of authority to impose unlimited tariffs on goods from nearly every country in the world. The court does not read IEEPA to confer such unbounded authority and sets aside the challenged tariffs imposed thereunder,” the court’s decision reads.

The court rejected the Trump administrations argument that the tariffs were sufficiently tied to the declared emergencies such as trade deficits, drug trafficking, and illegal immigration and lacked “identifiable limits” under the International Emergency Economic Powers Act.

Wednesday’s ruling stemmed from lawsuits by the Liberty Justice Center, representing small businesses, and a coalition of U.S. states—Oregon, Arizona, Colorada, Connecticut, Delaware, Illinois, Minnesota, Nevada, New Mexico, New York, and Nevada—arguing Trump’s tariffs violated constitutional and statutory limits.

Impact on the “Big Beautiful Bill”

The CIT ruling puts at risk the viability of Trump’s “Big Beautiful Bill,” now in the U.S. Senate after passing the House, which heavily relied on tariff revenue to fund roughly $4 trillion in proposed tax cuts over the next ten years such as the following:

• 15% tax reductions for those earning $30,000–$80,000
• No tax on tips
• No tax on overtime
• No tax on social security benefits
• An increase in the standard deduction
• Increases the pass-through business deduction from 20% to 23%
• Raises the estate tax exemption from $13.6 million to $15 million per individual
• Allows immediate full expensing for new factories, equipment, and U.S.-based investments
• Enhances tax credits or deductions for R&D activities
• Increases the Child Tax Credit from $2,000 to $5,000 per child.

Alternative Methods to Impose Tariffs

Trump could pursue alternative methods to impose tariffs through established legal channels used by past presidents such as:

• Section 232 of the Trade Expansion Act: Allows tariffs for national security threats, as Trump did in 2018 for steel and aluminum. New Commerce Department investigations could justify targeted tariffs.
• Section 301 of the Trade Act: Permits tariffs for unfair trade practices, like China’s intellectual property theft, following USTR investigations.
• Congressional Approval: Trump could seek legislation to authorize tariffs, though narrow Republican majorities in Congress make this difficult.
• Safeguard Tariffs (Section 201): Temporary duties to protect industries from import surges, based on ITC findings.

Author: Mario Lotmore