Trump tariffs suffer staggering setback in U.S. court

A U.S. Margaret court delivered a stunning reprehension of chairman Donald Trump's merchandise insurance on Wednesday, saying he abused his authority and eliminating many of his tariffs, at least for now.

The upshot for trading partners including Canada? Certain specific tariffs on steel and aluminum remain in place, but gone, for now, are sweeping levies on entire countries.

The order quashes Trump's 10 per cent across-the-board tariff on most nations, and his declaration of a fentanyl emergency to impose 25 per cent tariffs on numerous Canadian and Mexican goods.

The White House promised to fight back with every available tool. This likely means an immediate appeal, and possibly means Trump using different legal weapons for his trade wars.

Nevertheless, this decision made history.

American courts tend to be deferential to presidents on trade policy, but Trump has tested their limits with a barrage of protectionist actions unlike anything in modern history. 

Does Trump ‘always chicken out’ on tariffs?

One U.S. Trade lawyer called this easily the most significant legal setback of a president on trade policy in decades, with the possible exception of court losses for Richard Nixon.

He predicted fallout on several fronts. The Manhattan-based Court of International Trade said the U.S. Constitution gives Congress exclusive authority to regulate commerce with other countries that is not overridden by the president's emergency powers to safeguard the economy.

It said Trump abused the 1977 International Emergency Economic Powers Act to apply his fentanyl tariffs on Canada and Mexico, as well as his worldwide tariffs.

One of Lincicome's predictions is that some countries will now feel less urgency to negotiate tariff deals with Trump. Another prediction? Expect a gusher of goods to flow into the U.S. Immediately — especially at the land borders with Canada and Mexico — as importers take advantage of this potentially temporary lull in Trump's trade wars, pending a higher court decision. 

"The June import stats are going to be wild," said Lincicome, vice-president of general economics at the Cato Institute, a Washington-based think-tank.

"Particularly, for Canadians, this stuff's just sitting on the other side of the border. It's going to be like the Flight of the Valkyries across the border."

That is, until, and if, Trump wins an appeal. And if he uses another legal tool, like a 1974 trade law that allows temporary 150-day tariffs for less urgent matters.

The ruling came in a pair of lawsuits, one filed by the non-partisan Liberty Justice Center on behalf of five small U.S. Businesses that import goods from countries targeted by the duties and the other by 13 U.S. States.

The companies, which range from a New York wine and spirits importer to a Virginia-based maker of educational kits and musical instruments, have said the tariffs will hurt their ability to do business. At least five other legal challenges to the tariffs are pending.

Oregon Attorney General Dan Rayfield, a Democrat whose office is leading the states' lawsuit, called Trump's tariffs unlawful, reckless and economically devastating.

"This ruling reaffirms that our laws matter, and that trade decisions can't be made on the president's whim," Rayfield said in a statement.

The White House promised to fight. Trump spokesman Kush Desai said unfair foreign trade has created historic and persistent deficits, decimated American communities, workers, and defence manufacturing.

"It is not for unelected judges to decide how to properly address a national emergency," he said.

"President Trump pledged to put America First, and the administration is committed to using every lever of executive power to address this crisis."

In imposing the tariffs in early April, Trump called the trade deficit a national emergency that justified his 10 per cent across-the-board tariff on all imports, with higher rates for countries with which the United States has the largest trade deficits, particularly China.

Many of those country-specific tariffs were paused a week later. The Trump administration on May 12 said it was also temporarily reducing the steepest tariffs on China while working on a longer-term trade deal. Both countries agreed to cut tariffs on each other for at least 90 days.

Trump's on-and-off-again tariffs, which he has said are intended to restore U.S. Manufacturing capability, have shocked U.S. Financial markets.

The U.S. Dollar rose against both the Swiss franc, a traditional currency safe haven, and the Japanese yen following the court decision.

Wednesday's decision can be appealed to the U.S. Court of Appeals for the Federal Circuit in Washington, D.C., and ultimately the U.S. Supreme Court.

Washington-based trade lawyer Simon Lester concurred the new uncertainty casts a cloud over the president's attempts to negotiate with other countries, including Canada.

"This decision throws the existing negotiations for a loop," Lester said. "Foreign governments will have to reevaluate how they react to the Trump administration's trade demands."

Lincicome concurred: "It's a real open question now how many countries now are not returning the Trump administration's phone calls. ... [They] suddenly have a ton more leverage."

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