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Investing.com -- A U.S. court has blocked the majority of tariff increases imposed earlier this year by the Trump administration under the International Emergency Economic Powers Act (IEEPA), halting $200 billion worth of duties on imports from Canada, China, and Mexico.
The Court of International Trade ruled that the administration’s use of IEEPA to justify the sweeping tariff hikes, including a 10% baseline tariff and higher levies on non-USMCA compliant imports, exceeded constitutional limits.
The decision marks a significant blow to the White House’s tariff strategy. Strategists at Goldman Sachs said the ruling blocks 6.7 percentage points of effective tariff hikes, but emphasized that “this ruling represents a setback for the administration’s tariff plans and increases uncertainty but might not change the final outcome for most major U.S. trading partners.”
The three-judge panel concluded that the IEEPA does not grant the president broad tariff authority absent a clear emergency directly tied to trade. It specifically rejected the administration’s use of the fentanyl crisis and chronic trade deficits as justifications, stating they did not meet the legal threshold of an “unusual and extraordinary” threat.
The court also dismissed the argument that the case involved a political question not subject to judicial review.
While the ruling requires the administration to stop collecting the affected tariffs within 10 days, it does not mandate refunds on duties already paid.
The Trump administration has appealed the decision to the U.S. Court of Appeals for the Federal Circuit, but a ruling is unlikely within the court-imposed deadline, according to Goldman Sachs.
However, the White House retains several alternative trade authorities to reimpose similar tariffs. These include Section 122 of the Trade Act of 1974, which allows tariffs of up to 15% for 150 days, and Section 301, which does not cap tariff levels or durations.
Strategists expect a near-term response. “We would expect the White House to announce a similar across-the-board tariff using Sec. 122,” Goldman’s team led by Jan Hatzius said.
“This would then provide the administration time to launch a series of Sec. 301 cases against larger trading partners, potentially opening the door to imposing tariffs higher than 10% in some cases,” they noted, though it’s unlikely that the administration could wrap up Sec. 301 investigations on every U.S. trading partner within the next few months.
Further out, the administration could also lean more heavily on sectoral tariffs under Section 232, particularly for products like pharmaceuticals and electronics, where legal risks are lower.
Despite the court’s intervention, Goldman Sachs does not expect a material change in the administration’s tariff ambitions. “We still expect most of this revenue to materialize,” the strategists wrote, even if the legal route to implementation shifts.