A US federal appeals court has ruled that Donald Trump had no legal right to impose sweeping tariffs on almost every country on earth, but left in place for now his effort to build a protectionist wall around the American economy.

The US Court of Appeals for the Federal Circuit ruled Trump wasn’t legally allowed to declare national emergencies and impose import taxes on almost every nation, a ruling that largely upheld a May decision by a specialised federal trade court in New York.

“It seems unlikely that Congress intended to … grant the President unlimited authority to impose tariffs,” the judges wrote in a 7-4 ruling.

But they did not strike down the tariffs immediately, allowing his administration time to appeal to the Supreme Court.

The US president vowed to do just that. “If allowed to stand, this Decision would literally destroy the United States of America,” Trump wrote on his social media platform.

White House spokesman Kush Desai said Trump had acted lawfully, and “we look forward to ultimate victory on this matter.”

An attorney for small businesses affected by the tariffs, on the other hand, said the ruling shows Trump doesn’t have unlimited power to impose tariffs on his own.

“This decision protects American businesses and consumers from the uncertainty and harm caused by these unlawful tariffs,” said Jeffrey Schwab, director of litigation at the Liberty Justice Centre.

Putting pressure on allies

The ruling complicates Trump’s ambitions to upend decades of American trade policy completely on his own.

Trump has alternative laws for imposing import taxes, but they would limit the speed and severity with which he could act.

His tariffs — and the erratic way he’s rolled them out — have shaken global markets, alienated US trading partners and allies and raised fears of higher prices and slower economic growth.

But he’s also used the levies to pressure the European Union, Japan and other countries into accepting one-sided trade deals and to bring tens of billions of dollars into the federal Treasury to help pay for the massive tax cuts he signed into law July 4.

“While existing trade deals may not automatically unravel, the administration could lose a pillar of its negotiating strategy, which may embolden foreign governments to resist future demands, delay implementation of prior commitments, or even seek to renegotiate terms,” Ashley Akers, senior counsel at the Holland & Knight law firm and a former Justice Department trial lawyer, said before the appeals court decision.

The government has argued that if the tariffs are struck down, it might have to refund some of the import taxes that it’s collected, delivering a financial blow to the US Treasury.

“It would be 1929 all over again, a GREAT DEPRESSION!” Trump said in a previous post on Truth Social.

A dissent from the judges who disagreed with Friday’s ruling clears a possible legal path for Trump, concluding that the 1977 law allowing for emergency actions “is not an unconstitutional delegation of legislative authority under the Supreme Court’s decisions,” which have allowed the legislature to grant some tariffing authorities to the US president.

Revenue from tariffs now totals $159 billion, more than double what it was at the same point the year before.

Indeed, the Justice Department warned in a legal filing this month that revoking the tariffs could mean “financial ruin” for the United States.

What tariffs are in question

The ruling involves two sets of import taxes, both of which Trump justified by declaring a national emergency under the 1977 International Emergency Economic Powers Act (IEEPA):

—The sweeping tariffs he announced April 2 — “Liberation Day,” he called it — when he imposed “reciprocal” tariffs of up to 50 per cent on countries with which the United States runs trade deficits and a “baseline” 10 per cent tariff on just about everyone else. Those tariff rates have since been revised by Trump, in some cases after trade negotiations, and generally went into effect August 7.

The national emergency underlying the tariffs, Trump said, was the long-running gap between what the US sells and what it buys from the rest of the world.

The US president started to levy modified the tariff rates in August, but goods from countries with which the US runs a surplus also face the taxes.

The “trafficking tariffs” he announced on February 1 on imports from Canada, China, and Mexico, and later refined.

These were designed to get those countries to do more to stop what he declared a national emergency: the illegal flow of drugs and immigrants across their borders into the United States.

The Constitution gives Congress the power to impose taxes, including tariffs. But over decades, lawmakers have ceded authorities to the president, and Trump has made the most of the power vacuum.

But Trump’s assertion that IEEPA essentially gives him unlimited power to tax imports quickly drew legal challenges at least seven cases.

No president had ever used the law to justify tariffs, though IEEPA had been used frequently to impose export restrictions and other sanctions on US adversaries such as Iran and North Korea.

The plaintiffs argued that the emergency power law does not authorise the use of tariffs.

They also noted that the trade deficit hardly meets the definition of an “unusual and extraordinary” threat that would justify declaring an emergency under the law.

The United States, after all, has run trade deficits in which it buys more from foreign countries than it sells them for 49 straight years, and in good times and bad.

The Trump administration argued that courts approved former US President Richard Nixon’s emergency use of tariffs in a 1971 economic crisis that arose from the chaos that followed his decision to end a policy linking the US dollar to the price of gold.

The Nixon administration successfully cited its authority under the 1917 Trading With Enemy Act, which preceded and supplied some of the legal language used in IEEPA.

In May, the US Court of International Trade in New York rejected the argument, ruling that Trump’s Liberation Day tariffs “exceed any authority granted to the President” under the emergency powers law.

In reaching its decision, the trade court combined two challenges, one by five businesses and one by 12 US states, into a single case.

In the case of the drug trafficking and immigration tariffs on Canada, China, and Mexico, the trade court ruled that the levies did not meet IEEPA’s requirement that they “deal with” the problem they were supposed to address.

The court challenge does not cover other Trump tariffs, including levies on foreign steel, aluminium, and autos that the US president imposed after Commerce Department investigations concluded that those imports were threats to US national security.

Nor does it include tariffs that Trump imposed on China in his first term, and Former US president Joe Biden kept, after a government investigation concluded that the Chinese used unfair practices to give their own technology firms an edge over rivals from the United States and other Western countries.

Trump could potentially cite alternative authorities to impose import taxes, though they are more limited.

Section 122 of the Trade Act of 1974, for instance, allows the US president to tax imports from countries with which the US runs big trade deficits at 15 per cent for 150 days.

Likewise, Section 301 of the same 1974 law allows the US president to tax imports from countries found to have engaged in unfair trade practices after an investigation by the Office of the US Trade Representative. Trump used Section 301 authority to launch his first-term trade war with China.