On eve of tariff deadline, Trump's trade war faces key court test

Washington: US businesses and state leaders will urge a federal appeals court Thursday to invalidate many of President Donald Trump's tariffs, just one day before he is set to expand his global trade war with withering new duties on the United States' closest trading partners.

The coming arguments underscore the financial stakes for US importers -- and the legal risks for the administration -- as the White House begins to impose higher rates and carry out a series of new trade deals without the explicit approval of Congress.

The legal saga began this spring when a group of businesses and a coalition of states each sued the Trump administration on grounds that the president had vastly overstepped his authorities in the design of some of his steepest tariffs. A federal trade court agreed, determining in May that Trump did not have "unbounded" powers to impose duties as he saw fit.

The trade court ordered the White House to unwind those taxes on imports. But the Justice Department quickly appealed and soon secured a temporary halt to the mandate, allowing the president's tariffs to remain in place. Lawyers for the Trump administration had argued that an abrupt end to the president's policies would have sowed chaos and undermined its negotiations to broker more favorable trade agreements around the world.

The administration has since forged ahead with its plan to impose steep new tariffs on dozens of countries Friday. The threat of significant duties helped Trump broker several preliminary trade agreements, including with the European Union and Japan, both of which face tariffs of 15% on their exports to the US.

But the underlying legal questions surrounding his strategy -- and the extent to which the president can wage a limitless trade war -- remain for the courts to determine. The hearing Thursday, to be convened by a panel of judges on the US Court of Appeals for the Federal Circuit, is a key step in what will surely be a fight that lands at the Supreme Court.

In the end, the courts could uphold or strike down not only Trump's tariffs but possibly his trade deals, which in many cases would reduce, but not eliminate, the levies he has imposed on major trading partners.

"The president can negotiate deals," said Jeffrey Schwab, the interim litigation director for the Liberty Justice Center, a legal group that brought one of the lawsuits. "He's just got to get congressional approval."

For now, the legal uncertainty casts a long shadow over Trump as he prepares to drastically expand the use of tariffs on UStrading partners. Some of the president's forthcoming duties have been suspended and revised repeatedly since April, when he first promised them on "Liberation Day," but Trump has steadfastly refused this week to postpone his deadline again.

"The August First deadline is the August First deadline -- it stands strong, and will not be extended," he posted Wednesday on social media in all capital letters. "A big day for America!!!"

Generally, it is Congress, not the president, that has the power to impose tariffs, except in limited cases outlined by law. That includes the power to issue tariffs for national security purposes, which Trump has done with his duties on imported cars and steel, and with his new threats to tax pharmaceuticals and semiconductor imports.

But Trump has sought to apply some of the most painful duties in a novel way, by tapping a decades-old economic emergency statute that does not once mention the word tariff. To try to justify that strategy, the president has cited an evolving set of crises he must contain, including the flow of fentanyl into the United States and the country's persistent trade deficit with other nations.

Tariffs are taxes applied to foreign goods, and their financial impact could fall hardest on American businesses and consumers. In recent weeks, major businesses including Stanley Black & Decker and Tesla have warned investors about the potential hit they may face soon from the president's duties while others, such as Adidas, have said they might need to raise prices as a result.

The rising costs have prompted some affected companies -- from an auto parts manufacturer in Detroit to an educational toy company in Illinois -- to file a series of legal challenges against Trump in a bid to halt his trade policies.

The widening roster of lawsuits underscores how some businesses have been "hammered" financially, said Andrew Morris, a senior litigation counsel for the New Civil Liberties Alliance, a legal group with past ties to billionaire industrialist Charles Koch. The organization is representing plaintiffs in two other tariff lawsuits, one of which was filed in Texas in July.

Some of those fights are in their earliest stages, or they have been paused until the appeals court can determine the fate of the key tariff cases the Trump administration lost in the spring.

"This case is effectively about a president who is abusing his emergency power authority," said Dan Rayfield, the Democratic attorney general of Oregon, which is leading a coalition of 12 states in a lawsuit alleging that the tariffs are illegal and have hurt their budgets.

"It's hitting us as consumers, it's destabilizing our business and it's weakening our economy all at the same time, and they're doing it on the backs of us," he said.

The hearing on the states' case has been consolidated on appeal with the similarly successful lawsuit brought by the Liberty Justice Center on behalf of businesses including VOS Selections, a wine importer in New York. Lawyers for those companies told the panel of appellate judges in July that "no other president in the statute's nearly 50-year history has claimed that it authorizes tariffs."

The Justice Department has rejected those assertions, telling the court in its own filing that Congress "has long delegated broad tariff authority" to the president, as they referred to Trump's promises on trade during his "successful campaign for office."

By their reading, the emergency powers act permits the president to wield tariffs as a bargaining chip, and government lawyers told the court that it owed "substantial deference" to Trump on how to respond to a national emergency. The White House did not respond to a request for comment for this article.

The legal battle has already attracted significant attention, illustrating the stakes for the economy as Trump looks to reconfigure the global trading order on a claim of sweeping presidential power.

A wide array of economists -- including Jason Furman and N. Gregory Mankiw, who served under Presidents Barack Obama and George W. Bush, respectively -- banded together to tell the court that Trump had wrongly cited the trade deficit as an emergency warranting his novel use of the 1977 International Emergency Economic Powers Act, known as IEEPA.

The America First Policy Institute, a group that Trump's allies created, took the opposite view, warning that a ruling against the president would "eviscerate" his foreign policy and "deprive America of hundreds of billions of dollars in revenue."

Business lobbying groups also intervened, pleading with judges to strike down the heart of the president's trade war. The U.S. Chamber of Commerce joined the Consumer Technology Association, whose board includes executives from major tech companies, in arguing that the president's tariffs are "increasing their costs, undermining their ability to plan for the future and in some cases threatening their very existence."

"If IEEPA can be used to adjust tariffs, there's absolutely no limitations as to what could be done," said Neil Bradley, the executive vice president of the Chamber. "And that's a grant of tariff authority we don't think Congress ever intended."