Trump Tariff Power at Risk After Skepticism by Appeals Court (1)

President Donald Trump’s authority to issue sweeping global tariffs under an emergency law was met with skepticism at a federal appeals court hearing Thursday, a day before higher rates against dozens of countries are set to kick in.

A panel of 11 judges took turns questioning a top US Justice Department official about Trump’s argument that the nation’s persistent trade deficit qualified as a national emergency under the law, allowing the president to bypass Congress and hit countries across the globe with tariffs.

Trump’s tariffs address the “consequences of our exploding trade deficit” and allowed him “to put pressure” on other countries, Brett Shumate, who leads the Justice Department’s civil division, said at the hearing. He added later that Trump found deficits had spiked, reaching “a tipping point.”

A majority of the panel sharply probed the government’s position. Tariffs seemed “to have no friends” in the text of the emergency law, Judge Alan David Lourie, an appointee of George W. Bush, said at the hearing.

A group of Democratic-led states and small businesses are challenging the tariffs, arguing that Trump wrongfully invoked the International Emergency Economic Powers Actto issue the levies, and that Congress never intended for the law to be used in such a manner when it was passed nearly 50 years ago.

Thursday’s hearing lasted nearly two hours and ended without a ruling, which is possible within weeks. The cases are likely to wind up at the Supreme Court, drawing the justices into yet another fight this year over Trump’s agenda.

The US trade court in May sided with the challengers and ruled Trump’s tariffs illegal. But the US Court of Appeals for the Federal Circuit quickly paused that order and allowed the tariffs to stay in place temporarily until they could resolve the case. Trillions of dollars of global trade are embroiled in the legal fight.

Judge Jimmie Reyna, an Obama appointee, questioned why Congress had passed so many laws that explicitly delegate some tariff authority to the president in specific circumstances if IEEPA could be used so broadly.

“Why would the president ever rely on all these trade statues if he has under IEEPA this unbounded power?” Reyna said.

Neal Katyal, a lawyer for the small businesses, argued that even if the appeals court agreed with the administration that IEEPA’s language about regulating imports allowed Trump to declare at least some tariffs, there is an overarching legal principle that if Congress wants to give the president significant power, it has to clearly authorize it.

The challengers cited two of the Biden administration’s biggest losses before the Supreme Court — in fights over pandemic-era evictions restrictions and canceling federal student loan debt — to support their position that Trump now couldn’t try to read more power into the economic emergency law than it offered on its face.

Read More: Supreme Court Rulings Against Biden Now Threaten Trump Tariffs

Katyal and Oregon Solicitor General Benjamin Gutman, who argued for the states, both highlighted at the hearing Trump’s use of the word “persistent” in describing the US trade deficit as undermining any claim that they posed an emergency situation now.

In February, Trump used the law to impose tariffs on China, Canada and Mexico, arguing that the flow of the drug fentanyl and illegal immigration into the US constituted a national emergency. The president then declared another national emergency over the persistent US trade deficit and invoked IEEPA to issue duties in April against virtually all US trading partners, his so-called “Liberation Day” tariffs.

The government’s position that Trump’s declaration of an emergency couldn’t be reviewed by judges was also met with skepticism. At one point, Chief Judge Kimberly Moore, a Republican appointee, told the Justice Department lawyer to “get past that.”

Lawyers for the states and businesses argued that Trump’s use of IEEPA is illegal because the law doesn’t mention tariffs and is typically used to levy sanctions and asset freezes during national emergencies.

Katyal said that Trump’s use of the IEEPA was a “breathtaking claim to power that no president has asserted in 200 years and the consequences are staggering.”

Thursday’s hearing was held before the Federal Circuit’s entire slate of 11 active judges instead of a typical three-judge panel, meaning the ruling can immediately be appealed to the Supreme Court. Three of the judges were appointed by Republican presidents and eight by Democrats.

Thomas Berry, director of the Cato Institute’s Robert A. Levy Center for Constitutional Studies, who attended the hearing, said several judges appeared skeptical of the government’s argument that broad terms in IEEPA allowing the president to “regulate importation” should be read to allow Trump to unilaterally impose tariffs.

“Based on the tenor and questions of the arguments, it appears that the challengers have the better odds of prevailing,” Berry said in a statement.

A 10% flat global tariff has been in effect while the litigation unfolds. Trump set an Aug. 1 deadline for a new round of rate hikes on imports from countries that haven’t struck deals with the US, insisting that no further extensions would be granted.

On Thursday, Trump extended Mexico’s current tariff rates for 90 days to allow more time for trade negotiations. The contested levies could be in place for weeks or months before there’s a final resolution, creating more financial uncertainty for businesses.

Read More: IEEPA Takedown? Trump’s Favored Trade Weapon at Risk

US trade negotiators continue to strike deals with nations eager to lower their tariffs. Trump has hailed agreements with Japan and the European Union in the past week, following recent deals with nations including the Philippines and Vietnam.

Trump, in a post Thursday on his Truth Social platform, wished his lawyers good luck “in America’s big case today.”

“If our Country was not able to protect itself by using TARIFFS AGAINST TARIFFS, WE WOULD BE ‘DEAD,’ WITH NO CHANCE OF SURVIVAL OR SUCCESS,” he said. “Thank you for your attention to this matter!”

Read More: Trump Gives Mexico 90-Day Reprieve From Higher Tariffs

(Updates with additional detail from court hearing.)

To contact the reporters on this story:
Erik Larson in New York at elarson4@bloomberg.net;
Zoe Tillman in Washington at ztillman2@bloomberg.net

To contact the editors responsible for this story:
Misyrlena Egkolfopoulou at megkolfopoul@bloomberg.net

Steve Stroth

© 2025 Bloomberg L.P. All rights reserved. Used with permission.