A federal appeals court ruled on Friday that many of President Donald Trump’s most punishing tariffs were illegal, delivering a major setback to Trump’s agenda that may severely undercut his primary source of leverage in an expanding global trade war.

The ruling, from the US Court of Appeals for the Federal Circuit, affirmed a lower court’s initial finding in May that Trump did not possess unlimited authority to impose taxes on nearly all imports to the US. But the appellate judges delayed the enforcement of their order until mid-October, allowing the tariffs to remain in place so that the administration could appeal the case to the Supreme Court.

The adverse ruling still cast doubt on the centrepiece of Trump’s trade strategy, which relies on a 1970s law to impose sweeping duties on dozens of the country’s trading partners. Trump has harnessed that law — the International Emergency Economic Powers Act, or IEEPA — to raise revenue and pressure other countries into brokering favourable deals. The law has typically been reserved for sanctions and embargoes against other nations.

The loss proved especially stinging after the Trump administration told the court earlier on Friday that any weakening of its tariff powers could unleash economic chaos. Hours before the ruling, the President’s top economic advisers raised special concern about the fate of the trade agreements the US had struck with other governments. Among the deals they cited was an agreement with the European Union, which made favourable concessions to escape even higher US taxes on its goods.

The President, who has spent months insisting that his tariffs would make America “rich again”, has invoked the spectre of the Great Depression if his ability to impose levies is curtailed and if the country is forced to pay back billions of dollars in tariff revenue.

In a social media post after the ruling on Friday, Trump blasted the court and its conclusions, and appeared to tee up a forthcoming appeal to the Supreme Court.

“Today, a Highly Partisan Appeals Court incorrectly said that our Tariffs should be removed, but they know the United States of America will win in the end,” Trump wrote. “If these Tariffs ever went away, it would be a total disaster for the Country.”

The appeals court ruling implicates a vast set of tariffs, some of which date back to the beginning of Trump’s presidency. They include some of his toughest duties on China, Canada and Mexico, and his so-called reciprocal tariffs, which Trump later revised and began collecting this month.

To impose the duties, Trump leaned on IEEPA, a decades-old economic emergency law that does not even mention the word tariff. The President invoked his powers to combat what he described as a widening set of threats, from persistent trade deficits to the flow of fentanyl into the US.

Without IEEPA, the President would be limited in the duties he could apply, and the manner and speed at which they could be imposed. Otherwise, he could seek to enact tariffs with the support of Congress.

The administration has no guarantee of success at the Supreme Court.

Trump’s claims of seemingly unlimited trade power have elicited legal challenges from small businesses and states, which said they were harmed financially by taxes on foreign goods that the President had no right to issue. In May, a federal trade court agreed, invalidating many of the President’s duties on the grounds that the law did not grant him “unbounded authority” to wage his global trade war.

The Trump administration quickly appealed, and the court at first allowed the President to maintain his tariffs while the judges considered the legality of Trump’s actions. In its 7-4 ruling, issued late Friday, a majority on the court determined for a second time that the breadth of the tariffs the President had imposed was illegal.

“It seems unlikely that Congress intended, in enacting IEEPA, to depart from its past practice and grant the President unlimited authority to impose tariffs,” a majority of judges wrote in their ruling, citing the “magnitude” of the duties Trump had put in place.

Jeffrey Schwab, the director of litigation at the Liberty Justice Centre, which represented small businesses that brought one of the lawsuits, said the decision underscored that the President “doesn’t have the authority under IEEPA that he claims he has”.

No President before Trump had invoked the economic emergency law to tax imports. During Trump’s first term, his own advisers raised questions about whether IEEPA, which is typically used to issue foreign sanctions, could be used to levy broad tariffs.

Upon his return to the White House, however, Trump and his advisers took a more expansive interpretation, concluding that an economic emergency could be declared in response to a wide variety of concerns, including the trade deficit. They came to see IEEPA as a tool that would enable them to “move quickly”, said Ted Murphy, an international trade expert at the law firm Sidley Austin.

“The President can do lots of things in the trade space,” he said. “The fundamental part of this decision is reminding everyone that the power to assess tariffs was bestowed by the Constitution to Congress.”

Even if Trump appeals to the Supreme Court and loses, he still retains significant tariff powers.

The available tools include a provision of trade law known as “Section 232”, which allows the President to impose duties related to national security.

New York Times News Service