Most Trump tariffs are not legal, US appeals court rules

By Dietrich Knauth

NEW YORK, Aug 29 (Reuters) - A U.S. appeals court ruled on Friday that most of Donald Trump's tariffs are illegal, undercutting the Republican president's use of the levies as a key international economic policy tool.

Trump has made tariffs a pillar of U.S. foreign policy in his second term, using them to exert political pressure and renegotiate trade deals with countries that export goods to the U.S.

The tariffs have given the Trump administration leverage to extract economic concessions from trading partners but have also increased volatility in financial markets.

The decision from the U.S. Court of Appeals for the Federal Circuit in Washington, D.C., addressed the legality of what Trump calls "reciprocal" tariffs imposed as part of his trade war in April, as well as a separate set of tariffs imposed in February against China, Canada and Mexico.

The court's decision does not impact tariffs issued under other legal authority, such as Trump's tariffs on steel and aluminum imports.

The case is widely is expected to be appealed to the U.S. Supreme Court.

Trump justified both sets of tariffs - as well as more recent tariffs - under the International Emergency Economic Powers Act. IEEPA gives the president the power to address "unusual and extraordinary" threats during national emergencies.

The 1977 law had historically been used for sanctioning enemies or freezing their assets. Trump, the first president to use IEEPA to impose tariffs, says the measures were justified given trade imbalances, declining U.S. manufacturing power and the cross-border flow of drugs.

The law does not mention tariffs, although it allows the president to take a wide range of actions in response to a crisis. Trump's Department of Justice has argued that the law allows tariffs under emergency provisions that authorize a president to "regulate" imports or block them completely.

Trump declared a national emergency in April over the fact that the U.S. imports more than it exports, as the nation has done for decades. Trump said the persistent trade deficit was undermining U.S. manufacturing capability and military readiness. Trump said the February tariffs against China, Canada and Mexico were appropriate because those countries were not doing enough to stop illegal fentanyl from crossing U.S. borders, a claim the countries have denied.

The appeals court ruled on two cases, one brought by five small U.S. businesses and the other by 12 Democratic-led U.S. states, which argued that IEEPA does not authorize tariffs.

The Constitution grants Congress, not the president, the authority to issue taxes and tariffs, and any delegation of that authority must be both explicit and limited, according to the lawsuits.

The New York-based U.S. Court of International Trade ruled against Trump's tariff policies on May 28, saying the president had exceeded his authority when he imposed both sets of challenged tariffs. The three-judge panel included a judge who was appointed by Trump in his first term.

Another court in Washington, D.C., ruled that IEEPA does not authorize Trump's tariffs, and the government has appealed that decision as well. At least eight lawsuits have challenged Trump's tariff policies, including one filed by the state of California.