Trump tariffs face key test at U.S. appeals court

President Donald Trump speaks in the Roosevelt Room of the White House. (AP Photo/Mark Schiefelbein)

A U.S. appeals court on Thursday will review U.S. President Donald Trump’s power to impose tariffs, after a lower court said he exceeded his authority with sweeping levies on imported goods.

The U.S. Court of Appeals for the Federal Circuit in Washington, D.C., will consider the legality of “reciprocal” tariffs that Trump imposed on a broad range of U.S. trading partners in April, as well as tariffs imposed in February against China, Canada and Mexico.

A panel of all of the court’s active judges, eight appointed by Democratic presidents and three appointed by former Republican presidents, will hear arguments scheduled to begin at 10 a.m. ET in two cases brought by five small U.S. businesses and 12 Democratic-led U.S. states.

The arguments - one day before Trump plans to increase tariff rates on imported goods from nearly all U.S. trading partners - mark the first test before a U.S. appeals court of the scope of his tariff authority. The president has made tariffs a central instrument of his foreign policy, wielding them aggressively in his second term as leverage in trade negotiations and to push back against what he has called unfair practices.

The states and businesses challenging the tariffs argued that they are not permissible under emergency presidential powers that Trump cited to justify them. They say the U.S. Constitution grants Congress, and not the president, authority over tariffs and other taxes.

Trump claimed broad authority to set tariffs under the International Emergency Economic Powers Act (IEEPA), a 1977 law historically used for sanctioning enemies or freezing their assets. Trump is the first president to use it to impose tariffs.

Trump has said the April tariffs were a response to persistent U.S. trade imbalances and declining U.S. manufacturing power.

He said the tariffs against China, Canada and Mexico were appropriate because those countries were not doing enough to stop illegal fentanyl from crossing U.S. borders. The countries have denied that claim.

On May 28, a three-judge panel of the U.S. Court of International Trade sided with the Democratic states and small businesses that challenged Trump. It said that the IEEPA, a law intended to address “unusual and extraordinary” threats during national emergencies, did not authorize tariffs related to longstanding trade deficits.

The Federal Circuit has allowed the tariffs to remain in place while it considers the administration’s appeal. The timing of the court’s decision is uncertain, and the losing side will likely appeal quickly to the U.S. Supreme Court.

The case will have no impact on tariffs levied under more traditional legal authority, such as duties on steel and aluminum imports.

Trump’s on-again, off-again tariff threats have roiled financial markets and disrupted U.S. companies’ ability to manage supply chains, production, staffing and prices.

The president recently announced trade deals that set tariff rates on goods from the European Union and Japan, following smaller trade agreements with Britain, Indonesia and Vietnam. Trump’s Department of Justice has argued that limiting the president’s tariff authority could undermine ongoing trade negotiations, while other Trump officials have said that negotiations have continued with little change after the initial setback in court.

Trump has set an Aug. 1 date for higher tariffs on countries that don’t negotiate new trade deals.

There are at least seven other lawsuits challenging Trump’s invocation of IEEPA, including cases brought by other small businesses and California.

A federal judge in Washington, D.C., ruled against Trump in one of those cases, and no judge has yet backed Trump’s claim of unlimited emergency tariff authority.

(Reporting by Dietrich Knauth; Editing by David Bario, Noeleen Walder and Leslie Adler)