What will happen to Trump's tariffs now that a court has struck them down?

WASHINGTON (AP) — A federal court in New York dealt a major setback to President Donald Trump on Wednesday, blocking his bold plan to impose massive taxes on imports from nearly every country in the world.

A three-judge panel of the U.S. Court of International Trade ruled that Trump overstepped his authority when he invoked the 1977 International Emergency Economic Powers Act (IEEPA) to declare a national emergency and justify widespread tariffs.

The tariffs reversed decades of Washington's trade policy, disrupted global trade, rattled financial markets, and increased the risk of rising prices and recession in the United States and around the world.

The Court of International Trade has jurisdiction over trade-related civil cases. Its decisions can be appealed to the U.S. Court of Appeals for the Federal Circuit in Washington and, ultimately, to the Supreme Court, where legal challenges to Trump's tariffs are expected to end up.

What tariffs did the court block?

The court's decision blocks the tariffs Trump imposed last month on nearly all of the United States' trading partners and the levies he previously imposed on China, Mexico, and Canada.

On April 2, Trump imposed so-called reciprocal tariffs of up to 50% on countries with which the United States has a trade deficit, and base tariffs of 10% on almost all others. He subsequently suspended the reciprocal tariffs for 90 days to give countries time to agree on reducing barriers to US exports. But he kept the base tariffs in place. Claiming that he had extraordinary power to act without congressional approval, he justified the duties under the IEEPA, declaring the long-standing US trade deficits a "national emergency."

In February, he invoked the law to impose tariffs on Canada, Mexico, and China, saying the illegal flow of immigrants and drugs across the U.S. border constituted a national emergency and that the three countries needed to do more to stop it.

The U.S. Constitution grants Congress the power to impose taxes, including tariffs. But lawmakers have gradually allowed presidents to assume more power over tariffs, and Trump has taken full advantage of this situation.

The tariffs are being challenged in at least seven lawsuits. In Wednesday's ruling, the trade court combined two of the cases: one brought by five small businesses and another by 12 U.S. states.

The ruling leaves other Trump tariffs in place, including those on steel, aluminum, and foreign autos. But those levies were invoked under a different law that required a Commerce Department investigation and could not be imposed at the president's discretion.

Why did the court rule against the president?

The government had argued that the courts had approved then-President Richard Nixon's emergency use of tariffs during the 1971 economic and financial crisis that arose when the United States suddenly devalued the dollar by ending a policy that tied the U.S. currency to the price of gold. The Nixon administration successfully cited its authority under the Trading with the Enemy Act of 1917, which preceded and drew some of the legal language later used in the IEEPA.

The court disagreed, ruling that Trump's sweeping tariffs overrode his authority to regulate imports under the IEEPA. It also indicated that those levies did nothing to address the problems they were intended to solve. In their case, the states emphasized that US trade deficits hardly constitute a sudden emergency. The country has run them for 49 consecutive years through good times and bad.

After this, where does Trump's trade agenda stand?

Wendy Cutler, a former U.S. trade official who is now vice president of the Asia Society Policy Institute, a research group, says the court's decision "creates a turbulence in the president's trade policy."

"Partners negotiating hard during the 90-day tariff pause may be tempted to hold off on making further concessions to the United States until there is more legal clarity," he noted.

Companies will also need to reevaluate how they manage their supply chains, perhaps speeding up shipments to the United States to offset the risk of tariffs being reimposed after an appeal.

The trade court noted that Trump retains more limited power to impose tariffs to address trade deficits under another statute, the Trade Act of 1974. But that law limits tariffs to 15% and only for 150 days with countries with which Washington has large trade deficits.

For now, the trade court ruling "destroys the Trump administration's justification for using federal emergency powers to impose tariffs, which exceeds Congress's authority and contravenes any notion of due process," said Eswar Prasad, a professor of trade policy at Cornell University. "The ruling makes clear that Trump's sweeping tariffs unilaterally imposed represent an overreach of executive power."