A US appeals court has heard arguments on the legality of President Donald Trump’s tariffs, with a lower court previously ruling that he exceeded his authority by imposing sweeping new levies on imported goods. The case, brought by five small US businesses and 12 Democratic-led states, challenges Trump’s use of the International Emergency Economic Powers Act (IEEPA) to impose “reciprocal” tariffs.
The judges on the US Court of Appeals for the Federal Circuit in Washington, DC, questioned whether Trump’s tariffs were justified by emergency powers. Government lawyer Brett Shumate argued that IEEPA allows for “extraordinary” authority in an emergency, including the ability to stop imports completely and regulate imports in a crisis. However, the judges noted that IEEPA doesn’t mention tariffs, with one judge saying, “IEEPA doesn’t even say tariffs, doesn’t even mention them.”
Neal Katyal, a lawyer for the businesses, argued that the government’s interpretation of “regulate” would be a vast expansion of presidential power. “Tariffs are not permissible under IEEPA,” Katyal said, adding that the US Constitution grants Congress authority over tariffs and other taxes. Dan Rayfield, the attorney general of Oregon, called the tariffs a “regressive tax” that makes household items more expensive.
The tariffs have sparked economic uncertainty, with companies weighing financial guidance, staffing decisions, and prices. According to the Tax Foundation, Trump’s tariffs will increase federal tax revenues by $167.7 billion in 2025, or 0.55% of GDP. However, economists warn that the duties threaten to raise prices for US consumers and reduce corporate profits. Companies such as Procter and Gamble have announced plans to raise prices on some goods.
Trump’s use of tariffs as a central instrument of foreign policy has also drawn criticism. He has imposed tariffs on countries including China, Canada, and Mexico, citing unfair practices and trade imbalances. However, these countries have denied the claims. The US Court of International Trade previously ruled that IEEPA does not authorize tariffs related to longstanding trade deficits.
The appeals court will consider the administration’s appeal, with the losing side likely to appeal quickly to the US Supreme Court. The case will not impact tariffs levied under traditional legal authorities, such as duties on steel and aluminum. Trump’s Department of Justice has argued that limiting the president’s tariff authority could undermine ongoing trade negotiations.