A U.S. court has ruled against most of the tariff hikes rolled out earlier this year by the Trump administration under the International Emergency Economic Powers Act (IEEPA), suspending $200 billion in duties on imports from Canada, China, and Mexico.
The Court of International Trade found that using IEEPA to justify broad tariff increases—including a 10% baseline tariff and higher charges on goods not compliant with USMCA trade rules—exceeded constitutional authority.
This decision deals a major blow to the White House’s tariff approach. However, Goldman Sachs strategists pointed out that although the ruling halts 6.7 percentage points of effective tariff hikes, “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 determined that IEEPA does not grant the president sweeping tariff powers unless there is a clear emergency directly related to trade. It specifically rejected the administration’s attempts to justify tariffs based on the fentanyl crisis and ongoing trade deficits, stating these issues do not meet the legal threshold of an “unusual and extraordinary” threat.
The court also dismissed claims that the matter was a political question outside judicial review.
While the ruling orders the administration to cease collecting the affected tariffs within 10 days, it does not require refunds for duties already paid.
The Trump administration has filed an appeal with the U.S. Court of Appeals for the Federal Circuit, but Goldman Sachs notes a decision is unlikely before the court-imposed deadline.
Despite this setback, the White House retains other legal mechanisms to reinstate similar tariffs. These include Section 122 of the Trade Act of 1974, permitting tariffs up to 15% for 150 days, and Section 301, which imposes no limits on tariff rates or duration.
Goldman Sachs strategists expect a swift response: “We would expect the White House to announce a similar across-the-board tariff using Sec. 122,” said Jan Hatzius and his team.
They added, “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,” though wrapping up Sec. 301 investigations on all major U.S. trading partners in the near term is unlikely.
Looking further ahead, the administration might also increase use of sector-specific tariffs under Section 232, especially targeting sectors like pharmaceuticals and electronics where legal challenges are less pronounced.
Despite the court’s intervention, Goldman Sachs does not foresee a significant change in the administration’s overall tariff objectives. “We still expect most of this revenue to materialize,” the strategists concluded, even if the legal path to enforcement shifts.