At first, it was the markets that reined him in, and this week, it was the courts.
Donald Trump’s grand plan to remake global commerce and declare what he called “economic independence” from the world has been significantly tamed, less than two months after he imposed sweeping tariffs on virtually all of America’s trading partners.
The legal blow was painfully humbling for the US president: the Court of International Trade ruled on Wednesday that the entire legal basis of his tariffs using emergency economic powers was flawed, invalidating them just as America was plunging into negotiations with the EU, Japan, India and others to force them to change their trade policies. A federal appeals court on Thursday allowed the tariffs to remain in place for now while the judicial process plays out, but their legality is in jeopardy.
“This is a profound shock to the ongoing negotiations,” said Clark Packard, a trade policy analyst at the Cato Institute, a libertarian think-tank in Washington. “Trading partners are going to now reassess what is the likely outcome. If [Trump’s] wings have been clipped, and he doesn’t have carte blanche, they [might think] ‘We can buy ourselves time’.”
Financial and economic pressure, including a plunging stock market and a sell-off in US government debt, had already stymied Trump’s lofty goals.
To soothe investors, he hit the pause button on most of his so-called “liberation day” levies within just a week, and reached a deal to roll back tit-for-tat tariffs on Chinese imports early this month.
Trump was still able to keep the pressure on foreign capitals by warning that if they did not come to the table by early July, they would again be faced with exceedingly high and damaging tariffs on their exports to America — but that threat would be empty if the court rulings this week were to hold. As well as the Court of International Trade, a district court judge in Washington has ruled that Trump’s liberation day tariffs are “unlawful”.
“President Trump has placed a priority on American leadership on trade, and I am concerned these rulings could reduce the amount of leverage his administration has in active negotiations with our trade partners,” Adrian Smith, a Nebraska Republican who chairs the trade panel on the House of Representatives’ ways and means committee, told the Financial Times.
The White House has reacted defiantly. Stephen Miller, a senior Trump adviser, wrote on X: “We are living under a judicial tyranny.” Trump administration officials vowed to challenge the court rulings all the way up to the Supreme Court, if needed, and noted that they can use alternative legal mechanisms to impose tariffs on a wide range of imported goods from many countries.
“If there are little hiccups here or there because of decisions that activist judges make, then it shouldn’t just concern you at all, and it’s certainly not going to affect the negotiations, because in the end, people know President Trump is 100 per cent serious,” Kevin Hassett, director of the National Economic Council, told Fox Business on Thursday.
Some analysts believe Trump will manage to work around the court rulings.
“This is a speed bump rather than a roadblock. The centre of gravity in US policymaking has moved towards tariffs and there are other powers the administration can use to impose them,” said Lewis Alexander,
chief economic strategist at Rokos Capital Management.
Business reaction was guarded. The Court of International Trade’s “decision is encouraging news for American businesses and consumers and ought to be a powerful reminder for Congress of its responsibility to set tariffs”, said Jake Colvin, president of the National Foreign Trade Council, a lobby group in Washington.
But while the ruling was “welcome”, Colvin added that it “practically guarantees ongoing uncertainty given the appeals process and the likelihood that the administration will continue to leverage other legal authorities to impose tariffs”.
Alan Wolff, a senior fellow at the Peterson Institute for International Economics, who served as a senior US trade official in the past, said the court’s ruling had been unambiguous in rejecting Trump’s tariffs.
“The opinion goes point by point through all the arguments that have been made about whether the president had the authority to use a national economic emergency the way that he did,” added Wolff. “And it says ‘No, he didn’t’.”
The result is that barring definitive action by the appeals courts or even the Supreme Court to reverse the ruling, any new levies from the Trump administration will probably be more targeted and take longer to be implemented.
In fact, the sweeping tariffs that Trump imposed on April 2, which his administration saw not only as a negotiating tool but also as a way to raise revenue for the government and a matter of economic justice for America, may not resurface in their current form.
And even before this week’s court rulings, Trump showed signs of frustration that he was being forced to back away from his signature, aggressive second-term trade policies.
When asked by a reporter about a Wall Street moniker about Trump’s whipsawing approach to tariffs — coined by a Financial Times columnist as the “Taco trade”, and standing for “Trump always chickens out” — the president bristled.
“I chicken out? I’ve never heard that,” he told reporters on Wednesday. “That’s a nasty question. To me, that’s the nastiest question.”
But politically, Trump’s approval ratings have recovered along with the markets in recent weeks since he paused his steepest tariff plans, so a tamer agenda on levies may well be a blessing in disguise for the White House.
“If the administration were smart, they would come out and say, ‘We can’t do these tariffs because of the globalist elite judges’, or however they would phrase it. Ultimately, this has provided them with a pretty serious off-ramp,” said Packard.
Additional reporting by Lauren Fedor
