Trade Court Strikes Down Trump’s Global Tariffs Businesses and states had sued the government, saying the president didn’t have the authority to impose the levies
A federal trade court ruled President Trump didn’t have the authority to impose sweeping tariffs on virtually every nation, voiding the levies that have sparked a global trade war and threatened to upend the world economy.
The decision on Wednesday from the Court of International Trade blocked one of the Trump administration’s most audacious assertions of executive power, under the International Emergency Economic Powers Act of 1977. Shortly after the decision was handed down, lawyers for the Trump administration notified the court they will appeal.
“The court does not read IEEPA to confer such unbounded authority and sets aside the challenged tariffs imposed thereunder,” a three-judge panel wrote.
Trump has used IEEPA to underpin most of his second-term tariffs—from duties on Canada, Mexico and China imposed over fentanyl smuggling to the far-reaching reciprocal tariffs levied in early April on virtually every U.S. trading partner. Trump later paused the reciprocal tariffs for 90 days to allow for negotiations. (…)
The order blows a hole in global trade talks, already under way with more than a dozen nations, which began after the reciprocal tariffs were imposed. It also throws into question recent agreements with the U.K. and China. (…)
Wednesday’s ruling said it would be unconstitutional for Congress to delegate “unbounded tariff power” to the president. “An unlimited delegation of tariff authority would constitute an improper abdication of legislative power to another branch of government,” the court said. Congress placed limits in IEEPA, restricting when and how a president could place levies, the ruling said.
The panel also said the U.S. trade deficit didn’t fit the law’s definition of an unusual and extraordinary threat. (…)
Appeals from the court are heard by the U.S. Court of Appeals for the Federal Circuit and ultimately the Supreme Court. (…)
New York-based wine importer V.O.S. Selections and four other small businesses were the plaintiffs in one of the cases before the trade court. Another was filed by Oregon, New York and 10 others states, which additionally challenged tariffs that Trump said he imposed on Canada and Mexico to stop illicit drugs and illegal immigrants from coming into the U.S.
The plaintiffs in both cases said no other president had ever invoked IEEPA to impose tariffs, because nothing in the law authorizes such power. There is also no emergency, they said, noting that the U.S. trade deficit has existed for decades without creating an economic crisis. (…)
New York-based wine importer V.O.S. Selections and four other small businesses were the plaintiffs in one of the cases before the trade court. Another was filed by Oregon, New York and 10 others states, which additionally challenged tariffs that Trump said he imposed on Canada and Mexico to stop illicit drugs and illegal immigrants from coming into the U.S.
The plaintiffs in both cases said no other president had ever invoked IEEPA to impose tariffs, because nothing in the law authorizes such power. There is also no emergency, they said, noting that the U.S. trade deficit has existed for decades without creating an economic crisis. (…)
Justice Department attorneys said that the tariffs were necessary to address a U.S. trade deficit that had increased by 40% in the last five years. The deficit, they said, has had a cumulative effect on the country’s economy, threatening its supply chain, manufacturing and military preparedness. (…)
National security tariffs imposed on products like steel and aluminum, as well as similar duties planned on sectors like lumber and semiconductors, are justified under a different law and wouldn’t be affected by the ruling.
The judgment by the US Court of International Trade halts 6.7 percentage points of levies announced this year and the White House could use other tariff tools to make up for that, the bank’s economists said in a note to clients Thursday.
“This ruling represents a setback for the administration’s tariff plans and increases uncertainty but might not change the final outcome for most major US trading partners,” chief US political economist Alec Phillips wrote. “For now, we expect the Trump administration will find other ways to impose tariffs.”
The alternatives include the use of Section 232 levies, referring to the charges on steel, aluminum and auto imports on national security grounds. If all the pending investigations result in 25% tariffs and are added to current levies under the section, that would add 7.6 percentage points alone, they said. (…)
Trump has other options at his disposal to impose levies. He could apply Section 122 tariffs of up to 15% for 150 days or initiate investigations under Section 301, though those would take longer to implement.
Goldman’s Phillips said he doesn’t expect the court’s decision to have a major impact on the fiscal package in Congress, “as tariff revenue was never counted toward offsetting the cost of the package, and most lawmakers never made a clear link between the two issues.” (…)
ING:
This ruling marks a significant legal and political challenge to the use of emergency powers in trade policy and adds another layer of uncertainty to the whole US trade policy. It also signals that companies and countries will likely intensify efforts to eliminate sector-based tariffs, which have become a favoured instrument of US trade enforcement. As of 30 April, these tariffs had generated $26.8bn in customs revenue for FY2025.
We expect the pace of sector-based tariffs to accelerate, with additional measures likely to be announced soon. This will be important for ongoing negotiations with the EU and China; the negotiations that have the strongest impact on the global economy and financial markets. In this regard, we warn against too much relief or even complacency at this point.
In the case of Europe, the largest part of tariffs affects the automotive sector, and this part simply remains in place. If the US administration moves along with the intended tariffs or quotas on European pharmaceuticals, the largest part of European exports to the US would still be subject to tariffs of more than 20%.
Finally, the pushback against President Trump could trigger more aggressive tariffs or other economic policy announcements, which may impact key trading partners. Let’s not forget that one justification behind current trade tensions was not only the US trade balance deficit but also the search for additional government revenues. The lack of which would further fuel the current debt (un-)sustainability debate. (…)
Nvidia reported yesterday and Jensen Huang gave several interviews. This is what I found most significant from what Huang said:
- Blackwell is a home run.
- China is the 2nd largest AI market.
- We want all of the world’s AI researchers and developers to be building on American stacks.
- Without the American technology, the availability of China’s technology will fill the market.
- Huawei’s technology is probably comparable to H200 and they also offer a new system called Cloud Matrix that scales up to Blackwell.
- 50% of the world’s AI researchers are in China.
- Changing export regulations makes it difficult to trust Nvidia and American platforms.
- It’s prudent for Chinese customers to make sure that they develop their stacks on Huawei because it’s hard to rely on American technology at this point.
- If able to compete, American companies will compete. We just need to have the confidence to compete. If we can compete, we will win.
- Nvidia’s market share in China was 95% 4 years ago. It’s now 50% because of export limitations.
- China’s market is now $50B, growing to $200B+ before the end of this administration.
- The platforms that succeed are the platforms with the most developers.
- We want the world to prefer the American technology for their stacks.
- Software is now a giant part of our stacks.
Huang is touring Europe next week, trying to convince Europeans to stack on US tech (essentially NVDA’s) and shun Huawei.
But this is no longer the West vs China. Trump has made sure this now is America vs everybody else. There are no allies, only competitors who only “seek to take advantage of the US”.
Huang makes it clear that “platforms that succeed are the platforms with the most developers”, that China has the most developers, that Huawei’s technology is currently on par with NVDA’s and that software has taken over hardware in the ability to compete.
Philosophically, most countries would avoid China’s tech. But business wise, in this Trump world, Chinese technology must be appealing to many and Xi is promoting China’s stability, “dependability” and free trade.
Trump needs to pivot big time, and soon, if he wants to help Huang who says $50B is the size of Boeing, the company…
Oh! BTW, yesterday
(…) The move marks a significant new effort by the administration to stymie China’s ability to develop leading-edge artificial intelligence chips, as it seeks a technological advantage over its geopolitical rival. In April, Washington restricted the export of Nvidia’s China-specific AI chips. (…)
The US plans to start “aggressively” revoking visas for Chinese students, Secretary of State Marco Rubio said, escalating the Trump administration’s push for greater scrutiny of foreigners attending American universities.
Rubio said in a statement that students affected would include “those with connections to the Chinese Communist Party or studying in critical fields.” The US will also enhance scrutiny “of all future visa applications from the People’s Republic of China and Hong Kong,” he added.
China had the second most students in the US of any country in 2024, behind India. (…)
The move followed Rubio’s order a day earlier instructing US embassies worldwide to stop scheduling interviews for student visas as the administration weighs stricter vetting of applicants’ social-media profiles. It marks yet another effort by President Donald Trump’s push to restrict foreign students’ entry to American schools over claims that they might threaten US national security.
The White House has waged a high-stakes battle with universities that initially focused on elite universities such as Harvard and Columbia over antisemitism. That has turned into a bigger attack over the role of US higher education and the foreign students whose tuition is a crucial source of income for schools around the country. (…)
Hours earlier, the US president said Harvard should cap foreign student enrollment at 15%, escalating his campaign to force policy changes at the elite institution. (…)
International students accounted for 5.9% of the total US higher education population of almost 19 million. In the 2023-2024 school year, more than 1.1 million foreign students came to the US, with India and China accounting for about half, according to the Institute of International Education.
Last year, America sold a net $32 billion in services to China — including education, travel and entertainment — more than double the amount in 2022 and accounting for 11% of the nearly $300 billion global total. Almost a third of US services exports to China were related to education, coming from tuition and living expenses for the Chinese students studying in the US. (…)
Taking action against people with links to the Chinese Communist Party is a sweeping measure, given the role it plays in the lives of Chinese people and institutions, including universities and enterprises. While just under 100 million people count as members of the party, its reach is so pervasive that the number of those who can be said to have ties with it runs into multiples of that figure. (…)
US President Donald Trump has barred the export of critical US jet engine parts and technology to China, the New York Times reported.
The move could seriously impact China’s efforts to develop a domestic planemaking industry, with one person familiar with the matter saying the US Commerce Department had suspended some licenses that allowed US companies to sell products and technology to state-owned Commercial Aircraft Corp of China Ltd.
Comac, as the plane maker is known, depends on GE Aerospace-made US engines for its C919 planes.
The latest salvo by Washington is yet another challenge for China amid a broader trade war. China had earlier temporarily paused Boeing deliveries in response to escalating tariffs, only to rescind its edict after the two countries agreed to a tariff truce. (…)
Bloomberg last month reported Comac had stockpiled engines to build dozens of planes this year, potentially adverting a near-term supply crunch. (…)
- China vows to open markets to Pacific Island nations as US retreats Trump’s cuts in foreign aid and global tariffs have created opportunity for Beijing
Not a good day in D.C. yesterday:
Big Law Firms 3, Trump 0 Three judges across the political spectrum have now said the President’s punitive executive orders are unconstitutional.
The ‘TACO Trade’ That Has Trump Fuming President says ‘Trump Always Chickens Out’ claim is wrong and tariff changes are negotiation
The president rejected claims that he is backing down on tariffs, saying his strategy involves setting a “ridiculous high number” before negotiating it down in exchange for concessions. “You call that chickening out,” Trump said in the Oval Office, adding that “it’s called negotiation.”
Some have suggested the president’s tendency to announce tough policies only to backtrack on those pronouncements later is growing more predictable. They refer to the market’s reaction as the “TACO trade,” a term popularized by Financial Times columnist Robert Armstrong. As in, “Trump Always Chickens Out.” (…)
China’s biotech boom leaves U.S. playing catch-up
China is now setting the pace in life sciences R&D, conducting more clinical trials than the U.S. and licensing new discoveries to American companies.
China has become a linchpin in global drug development, the result of a decade-long national strategy to develop a biopharmaceutical industry.
China has surpassed the U.S. in drug clinical trials, per a report from GlobalData, marking a turning point in the global race to dominate the life sciences.
- An independent, bipartisan commission told Congress last month that China is beating the U.S. in advanced biotech and that policymakers need to pour significant resources into the sector over the next five years to keep up.
- Some experts say the Trump administration’s cuts to National Institutes of Health and university-based biomedical research risk putting the U.S. further behind when it should be supporting work on drugs targeting cancer and other conditions and outbreaks like the avian flu.
- “China is not the [biotech] superpower that has overtaken the U.S., but we certainly have to be very careful that they don’t become the superpower,” said entrepreneur Cyriac Roeding, who’s been tracking Chinese influence in the industry for nearly a decade.
In 2024, China listed more than 7,100 clinical trials in the World Health Organization’s International Clinical Trials Registry Platform. The U.S. listed about 6,000 trials.
- Beijing and Shanghai had more laboratory and R&D space under construction at the end of 2024 than any other global markets, with Boston in a distant third place, according to an April report from CBRE.
- Pharmaceutical and medical technology patents also increased 379% in China over the past decade, the CBRE report said.
Cheaper labor and less regulation have shifted drug discovery from the U.S. to China. The investment bank Stifel projects 37% of big pharmaceutical companies’ licensed molecules will come from China this year.
- Chinese biotechs have gone from mostly replicating U.S. discoveries with copycat products to creating new treatments that could potentially dominate categories like cancer therapies and autoimmune diseases.
- That’s led to more licensing agreements for experimental Chinese drugs and significant new investments from companies like Pfizer, GSK, Sanofi and Novartis.
“When U.S. drugmakers license compounds from China, they divert funds that might otherwise bolster innovation hubs such as Boston’s Kendall Square or North Carolina’s Research Triangle,” Scott Gottlieb, President Trump’s first-term Food and Drug Administration commissioner, wrote in an op-ed in Stat this month.
- “The U.S. biotechnology industry was the world’s envy, but if we’re not careful, every drug could be made in China.”
A defining moment came last fall, when Summit Therapeutics announced that a cancer immunotherapy it licensed from a Chinese biotech firm outperformed Merck’s blockbuster Keytruda in patients with advanced lung cancer.
- Some likened the development to the breakthroughs from Chinese AI startup DeepSeek that rocked Silicon Valley.
- Scholars at the Center for Strategic and International Studies wrote in a March commentary that it wasn’t a one-off event, noting there are increasing numbers of new drugs in development, accompanied by a surge in clinical trials.
Gottlieb said the trend will accelerate unless the U.S. takes steps to make U.S.-based drug development easier.
- He advocates using AI and other tools to tap existing data on drugs’ performance to ease the cumbersome requirements of early clinical studies — something the FDA is just starting to address.
- Roeding, the biotech entrepreneur, said improving the speed of clinical trials and ensuring stable funding for startups are necessary to keep the U.S. at the forefront of innovation.
The Fed Forecasts Stagflation Officials say a ‘cautious approach’ will help navigate the risks of higher inflation and weaker growth
(…) “Participants agreed that uncertainty about the economic outlook had increased further, making it appropriate to take a cautious approach until the net economic effects of the array of changes to government policies become clearer,” said the minutes.
The minutes strongly suggest the Fed isn’t close to lowering rates anytime soon. Instead, the meeting summary, released with the customary three-week delay, highlighted fears over a recipe for stagflation, where economic activity slows while price increases accelerate. (…)
Trade-policy announcements prompted the Fed’s staff economists to revise lower their expectations for economic growth this year and next year compared with a forecast prepared for the March meeting. As a result, the labor market was projected to “weaken substantially” over the rest of the year, leading the unemployment rate to rise and remain elevated through 2027.
Tariffs, meanwhile, were expected to “boost inflation markedly this year and to provide a smaller boost in 2026,” the minutes said. Even after substantially revising their inflation forecast for 2025, officials thought that if their forecast turns out to be wrong, it would be because inflation was even higher in 2026 or 2027.
The minutes suggested that officials were particularly focused on the risks of higher inflation. The minutes said almost all policymakers in attendance flagged the risk that inflation could be more persistent than expected, the minutes said.
Many officials said business contacts or survey responses suggested firms “were planning to either partially or fully pass on tariff-related cost increases to consumers,” the minutes said. Some expressed concern that tariffs on intermediate goods, such as steel or aluminum, could put additional pressure on inflation.
Several policymakers said they were hearing from businesses who weren’t subject to tariffs who might nevertheless opportunistically raise their prices if competitors did so as well. (…)
FYI:
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