Trump’s Appellate Court Tariff Loss: It Isn’t Over Until the Fat Lady Sings

By any commonsense standard, the fact that Trump has been imposing what he presents as across the board tariffs (although he often narrow them to somewhat reduce harm to the US) which should be regarded the Administration imposing unconstitutional taxes should be a no-brainer legally. And superficially, the fact that the U.S. Court of International Trade and now a Federal appeals court rejected Trump’s abuse of emergency powers conferred by Congress under the e 1977 International Emergency Economic Powers Act (IEEPA) would seem to represent a crushing blow to Trump’s use of tariff threats and action as a way to browbeat other countries into submission. And that’s before Trump regularly making statements that suggested his tariffs were not based much if at all on the pretext that US trade deficits were an emergency. Among the many examples were his tit for tat escalation with China before Trump went TACO, or Trump imposing 50% tariffs on Brazil over its alleged mistreatment of Trump ally Bolsonaro.

However, there is good reason to think Trump will prevail at the Supreme Court. The 7-4 appeals court split was on party lines. The appellate court was also cautious in sending parts of the case back to the Court of International Trade and not putting an injunction on the tariffs, which was a reversal of the lower court ruling. The appeals court, instead gave the Administration till October 14 to appeal, which Trump has indicated it will do. Even though the Administration has whinged that tariffs paid so far are could subject to refunds and $159 billion is a lotta refunds, a top tax expert scoffed at that idea (at best, tariff payers would have to litigate and it would take years before any final ruling was made).

But even if Trump gets his tariff bludgeon back in full, the setback still has an impact. One we are seeing already, with Trump trying to reassert his tariff manhood by threatening 200% tariffs on imported drugs. Note that these would presumably be allowable as analogous to the tariffs have not been contested in court, such as the ones on steel, aluminum, and autos. Those invoked existing tariff authority and were imposed following Commerce Department analysis that found these imports threatened national security. With the pharma imports. Trump is contending that shortages during Covid proves that there are similar security risks. Note that the authority under Section 232 of the Trade Expansion Act of 1962 still requires a formal Commerce Department investigation. I have not seen an indication that one has yet been conducted on drug imports.

Trump can impose tariffs unilaterally under the Trade Act of 1974. However, it limits tariff application to nations with which the US runs significant trade deficits, and then to only 15% and for 150 days. Reuters reported that Scott Bessent threatened over the weekend to use Smoot Hawley if Trump lost in the Supreme Court:

One of those authorities, he [Bessent] added, could be Section 338 of the Smoot-Hawley Tariff Act of 1930, which allows the president to impose tariffs of up to 50% for five months against imports from countries that are found to discriminate against U.S. commerce.

Bessent conceded that….”there are lots of other authorities that can be used – not as efficient, not as powerful.”

CNBC felt compelled to point out

:

A curious side note: Smoot-Hawley is described by an article on the U.S. Senate website as “among the most catastrophic acts in congressional history.”

But let’s first give more background on the tariff ruling and then turn to what might happen next. An overview from Associated Press:

The U.S. Court of Appeals for the Federal Circuit ruled Friday that Trump went too far when he declared national emergencies to justify imposing sweeping import taxes on almost every country on earth. The ruling largely upheld a May decision by a specialized federal trade court in New York…..

Trump on April 2 — Liberation Day, he called it — imposed so-called reciprocal tariffs of up to 50% on countries with which the United States runs a trade deficit and 10% baseline tariffs on almost everybody else.

The president later suspended the reciprocal tariffs for 90 days to give countries time to negotiate trade agreements with the United States — and reduce their barriers to American exports…

Those that didn’t knuckle under — or otherwise incurred Trump’s wrath — got hit harder earlier this month. Laos got rocked with a 40% tariff, for instance, and Algeria with a 30% levy. Trump also kept the baseline tariffs in place….

The administration had argued that courts had approved then-President Richard Nixon’s emergency use of tariffs in the economic chaos that followed his decision to end a policy that linked the U.S. 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 later used in IEEPA.

In May, the U.S. 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 U.S. states — into a single case.

On Friday, the federal appeals court wrote in its 7-4 ruling that “it seems unlikely that Congress intended to … grant the President unlimited authority to impose tariffs.”

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 president.

What Happens Now?

The Trump tariffs remain in effect until the Supreme Court reverses them, if it actually does so. That will take months. Despite press accounts that some large retailers like Walmart and Amazon were intially not putting through most of the tariff increases, it was clear that was not going to hold for long and Walmart said as much in May. This is despite the fact that, in aggregate, corporate profit share as a percent of GDP is at historically high levels, which suggests many companies could eat some of the tariff costs. And they may also lack pricing power to shift them fully or even much to buyers.

But as we are seeing large retailers are public companies and see keeping investors happy as paramount, and those owned by private equity are if anything even more bottom-line fixated. That means preserving profit margins as much as possible. So any moderation so far seems likely due to concern about too visibly crossing of Trump, as well as it perhaps being seen as desirable to administer the sticker shock gradually. In addition, there was considerable stockpiling, particularly of Chinese goods, before the “Liberation Day” tariffs kicked in. So the seeming moderation may also reflect not having yet used up all of their pre-tariff inventories.

So not surprisingly, there are plenty of accounts of companies that are increasing prices due to tariffs. A partial list:

Adidas, Walmart, Home Depot, and other major brands that say Trump’s tariffs are pushing them to raise prices Business Insider

Higher Prices Are Coming for Household Staples Wall Street Journal

‘Sneakflation’: How Trump’s tariffs are gradually raising costs for American consumers CNN

US retail giants raise prices and seek new import sources due to tariffs El Pais

More tariff-related price hikes are coming — here’s what experts recommend buying before it’s too late NBC

And some of these price hikes are very visible:

Holy shit!

Has anyone been paying attention to the price of coffee?

Less than 6 months ago,

This coffee was $11.98.

Trump’s 50% tariff on Brazil seems to have been passed along to the consumer.

Nice work MAGA.

Fucking idiots. pic.twitter.com/KKqB7cMz31

— Travis Matthew (@Matthewtravis08) August 31, 2025

And that’s before factoring in job costs:

Wow Detroit Axle is filing a lawsuit over Trump’s Tariffs because they may end up having to close because they can’t afford the Tariffs and at least 102 workers will lose their jobs. They say for every $1 million in goods they import we get to pay $725,000 dollars in Tariffs! 😡 pic.twitter.com/y1ABc6tC6c

— Suzie rizzio (@Suzierizzo1) September 1, 2025

Mind you, the scaling is a bit sus and correlation is not causation. Nevertheless, the chart below does show that the Trump tariffs have not improved manufacturing employment:

This is manufacturing employment since Trump took office.

Notice anything interesting?

(P.S. ‘Liberation Day’ tariffs were announced on April 2nd.) pic.twitter.com/bIUeOCbGSn

— Micah Erfan (@micah_erfan) August 31, 2025

And one wonders why it would. Manufacturing is ever more automated. New plants won’t generate many jobs. So between prices and the lack of more hiring, voters are souring on the tariffs:

BOOM: A whopping 60% of Americans now OPPOSE Trump’s tariffs — up from 40% before Nov.

20% of Americans learned the hard way how fucking stupid Trump & his idiotic policies are.

Now we’re ALL paying the price.

MAGA, if only you’d believed us when we warned you. pic.twitter.com/znvT9WV9dd

— Morgan J. Freeman (@mjfree) September 1, 2025

The tariff pain is severe in agriculture, as it was with the Trump 1.0 tariffs. From Fortune in Rural America is suffering an economic crisis as crop prices plunge — ‘U.S. soybean farmers cannot survive a prolonged trade dispute’:

U.S. producers of corn and soybeans have sent dire warnings as prices for their crops have crashed in recent years while President Donald Trump’s trade war whipsaws farmers.

On Thursday, the National Corn Growers Association raised alarms about “the economic crisis hitting rural America, as commodity prices drop at a time when input costs remain at near-record highs.”

Corn prices have plunged more than 50% from their 2022 peak, while production costs are down just 3% in that span, translating to a loss of 85 cents per bushel, the NCGA said, adding that the outlook for next year is worse with even lower prices and higher costs.

A week before that, the American Soybean Association sent a letter to Trump, warning that “U.S. soybean farmers are standing at a trade and financial precipice.”

The group asked that Trump prioritize soybeans in trade talks with China, seeking major purchase commitments as well as the removal of Beijing’s duties on the U.S.

“Historically, the U.S. was the provider of choice for Chinese customers,” the letter said. “However, due to ongoing tariff retaliation, our longstanding customers in China have and will continue to turn to our competitors in South America to meet their demand, a demand Brazil can meet due to significantly increased production since the previous trade war with China.”

With harvest season fast approaching, the association added that China hasn’t purchased any U.S. soybeans for the months ahead.

So farmers will remain on the ropes even longer than they might otherwise have due to foreign countries holding back on further negotiations as entirely reasonable legal objections working their way through the courts.

And even though farmers are a dramatic example, in general, businesses hate uncertainty. And the tariff whipsaws are generating that aplenty. From the Wall Street Journal in Six Months Into Tariffs, Businesses Have No Idea How to Price Anything:

How much should a copper bathtub cost? Clifford Thompson is trying to figure that out.

Until now, the hand-hammered tubs his family-owned business imports from India have carried a suggested retail price of about $3,300. President Trump’s 50% tariff on copper imports and steep levies on goods from India are forcing Thompson Traders to rethink that price, but settling on a new one isn’t easy.

Just this week, the levies on Indian goods doubled to 50%—days before an appeals court late Friday struck down the legal basis for at least part of those tariffs, a ruling likely heading for Supreme Court review. The North Carolina company’s negotiations with big-box retailers over even small price increases are maddeningly slow. And Thompson, the company’s president, isn’t certain what inflation-weary consumers will accept—or how much competitors plan to charge.

“Everyone is struggling to figure out what to do, what’s the right decision, where do we set prices,” Thompson said from the warehouse offices of the 30-person company founded by his mother, Alejandra Ochoa de Thompson.

The impact of tariffs has been a question hanging over the economy. So far, the global trade war hasn’t caused a surge in prices. That is in large part because companies have absorbed price increases, though that might not last. Pretariff inventories are running low, forcing companies to confront difficult pricing decisions they can no longer delay.

Federal Reserve Chair Jerome Powell said last week that tariffs’ effects on consumer prices “are now clearly visible” in some categories of goods, and are expected to accumulate in the months ahead. In a recent Richmond Fed survey, about 38% of businesses reported being only slightly certain or not at all certain about the prices they will charge for the rest of the year. Nearly 60% were either slightly certain or not at all certain about the costs of materials for the remainder of the year.

Thompson Traders says its pricing limbo can’t last forever because it can’t absorb a double-digit import tax on so many goods. If it can’t raise enough prices by year-end, it might need to take drastic steps to reduce costs, including slashing marketing and executive pay, Clifford Thompson said.

Repricing, though, isn’t as easy as changing a tag—in part because suppliers and big-box stores are engaged in an epic tussle over who will pay what.

Retailers, including Lowe’s and Home Depot, buy Thompson Traders’ wares and set the retail price themselves. And they have been reluctant to pay Thompson Traders more.

In other words, not only are retailers uncertain about how much of tariff costs to pass on to consumers, they are also trying to hammer suppliers, who are often smaller concerns. This behavior is one reason one of my former attorneys, who had many entrepreneurs as clients, told them never to take an order from WalMart. She’d repeatedly see the giant chain seek to and succeed at becoming their biggest customer, then forcing them to accept lower prices, with the end game nearly always being the shuttering of the business.

Turning to the foreign country perspective, even if they reason the Republican-dominated Supreme Court will back Trump, and they’ll get better terms now if they give Trump a trade headline opportunity, the domestic backlash to a perceived-to-be-unnecessary or at best premature capitulation to Trump would be ginormous.

And that’s before the fact that cinching a supposed deal with Trump means nothing, since he feels free to retrade them. Former US ambassador Chas Freeman has gone on at length, and recently with uncharacteristic anger, about Trump’s conduct. There are no written terms, so that alone allows for sharp practices. The EU is finding out how worthless the Trump team’s word is. Having thought it reached an optically lousy but purportedly not as terrible as it might seem agreement, Trump is back with new tariff threats to wrest more concessions from the EU. From the Guardian in Trump threatens tariffs on countries that ‘discriminate’ against US tech:

Donald Trump has threatened to impose tariffs and export restrictions on countries whose taxes, legislation and regulations target US big tech companies such as Google, Meta, Amazon and Apple…

Trump said: “As the president of the United States, I will stand up to countries that attack our incredible American tech companies. Unless these discriminatory actions are removed, I, as president of the United States, will impose substantial additional tariffs on that country’s exports to the USA, and institute export restrictions on our highly protected technology and chips.”

The threat puts pressure on the UK and the EU, which both struck recent trade agreements with the US. The EU has in place regulations to limit the power of big tech companies through the Digital Services Act, and several member states including France, Italy and Spain have digital services taxes in place.

Further commentary inthe Guardian:

How long are we, citizens of the EU, going to tolerate these threats?…

Throughout history, humanity has managed to regulate its territorial, maritime and airspace. This is the prerogative of sovereign states…

Europe is free to define its own laws and policies, and remains an open market. But that openness comes with one condition: our laws must be respected. Our democratic sovereignty must be upheld. That is non-negotiable. Not for sale. Platforms, wherever they come from, must now comply with our democratic framework if they wish to access our markets. Otherwise they will face heavy sanctions, which the European Commission is duty-bound to apply firmly and swiftly.

There are no tariffs. There is no attempt to shut anyone out. There is no desire for prohibition in our European digital space. This is quite the opposite of what the US has imposed on the physical world of trade. A punitive unilateral US tariff regime is already weighing heavily on the EU. And that should make us reflect….

Why is Europe – the US’s largest trading partner – not treated on the same terms as Mexico or Canada, which have trade volumes with the US that are comparable to the EU’s? After months of tough negotiations with the Trump administration, they maintained full exemptions from tariffs on more than 90% of their exports, and tariffs ranging from 10% to 50% on the rest. Their overall average tariff rate now stands below 5%. This was the result of four months of hard, head-to-head negotiation between Mexico, Canada and the US. It was not a foregone conclusion, but the fight was worth it.

The commission rightly entered into negotiations on the same basis – zero for zero – across a very broad scope of products. Why then did Europe end up lowering its guard and accepting a 15% tariff on European exports to the US, while conceding zero tariffs on US imports, including most agricultural products?….

We were told that capitulation was preferable to uncertainty and the risk of a trade war…

We were told humiliation was the price we had to pay for stability. But if we don’t push back now, we will get humiliation and instability. Will this latest assault on our digital laws finally be enough to wake us up?

If nothing else, the EU deal reflects Ursula von der Leyen’s weakness as a negotiator, and perhaps more generally, its reluctance to defy Trump as it is begging for continued help with Project Ukraine.

Regardless, the continued unsettled legal status of Trump’s tariffs will only further damage US consumers, businesses and our relations with other countries, particularly to once friendly ones we’ve abused. But Trump will get his tariff weapon regardless, even if it’s the lower-strike-power versions.