US appeals court hears arguments over Trump tariffs

WASHINGTON - Oral arguments over President Donald Trump’s power to impose tariffs kicked off on July 31 before a US appeals court, after a lower court said he exceeded his authority with sweeping levies on imported goods.

The US Court of Appeals for the Federal Circuit in Washington, DC, is considering the legality of “reciprocal” tariffs that

Mr Trump imposed on a broad range of US trading partners in April,

as well as tariffs imposed in February against China, Canada and Mexico. 

A panel of all of the court’s active judges, eight appointed by Democratic presidents and three appointed by former Republican presidents, is hearing arguments in two cases brought by five small US businesses and 12 Democratic-led US states.

“Tariffs are making America GREAT & RICH Again,” Mr Trump wrote in a social media post on July 31 morning. “To all of my great lawyers who have fought so hard to save our Country, good luck in America’s big case today.” 

Tariffs are starting to build into a significant revenue source for the federal government, with customs duties in June quadrupling to about US$27 billion (S$35 billion), a record, and through June have topped US$100 billion for the current fiscal year. That income could be crucial to offset lost revenue from Mr Trump’s tax bill passed into law earlier in July.

But economists say the duties threaten to raise prices for US consumers and reduce corporate profits. Mr Trump’s on-again, off-again tariff threats have roiled financial markets and disrupted US companies’ ability to manage supply chains, production, staffing and prices.

The arguments - one day before Mr Trump plans to increase tariff rates on imported goods from nearly all US trading partners - mark the first test before a US appeals court of the scope of his tariff authority.

The president has made tariffs a central instrument of his foreign policy, wielding them aggressively in his second term as leverage in trade negotiations and to push back against what he has called unfair practices.

The states and businesses challenging the tariffs argued that they are not permissible under emergency presidential powers that Mr Trump cited to justify them. They say the US Constitution grants Congress, and not the president, authority over tariffs and other taxes.

Mr Dan Rayfield, the attorney general of Oregon, one of the states challenging the levies, said that the tariffs were a “regressive tax” that is making household items more expensive.

Mr Trump claimed broad authority to set tariffs under the International Emergency Economic Powers Act (IEEPA), a 1977 law historically used for sanctioning enemies or freezing their assets. Mr Trump is the first president to use it to impose tariffs.

Mr Trump has said the April tariffs were a response to persistent US trade imbalances and declining US manufacturing power.

He said the

tariffs against China, Canada and Mexico

were appropriate because those countries were not doing enough to stop illegal fentanyl from crossing US borders. The countries have denied that claim.

On May 28, a three-judge panel of the US Court of International Trade sided with the Democratic states and small businesses that challenged Mr Trump. It said that the IEEPA, a law intended to address “unusual and extraordinary” threats during national emergencies, did not authorise tariffs related to longstanding trade deficits.

The Federal Circuit has allowed the tariffs to remain in place while it considers the administration’s appeal. The timing of the court’s decision is uncertain, and the losing side will likely appeal quickly to the US Supreme Court.

Trade negotiations

The case will have no impact on tariffs levied under more traditional legal authority, such as duties on steel and aluminum imports.

The president recently announced trade deals that set tariff rates on goods from the European Union and Japan, following smaller trade agreements with Britain, Indonesia and Vietnam.

Mr Trump’s Department of Justice has argued that limiting the president’s tariff authority could undermine ongoing trade negotiations, while other Trump officials have said that negotiations have continued with little change after the initial setback in court.    

Mr Trump has set an Aug 1 date for higher tariffs on countries that don't negotiate new trade deals. 

There are at least seven other lawsuits challenging Mr Trump’s invocation of IEEPA, including cases brought by other small businesses and California.

A federal judge in Washington, DC, ruled against Mr Trump in one of those cases, and no judge has yet backed Mr Trump’s claim of unlimited emergency tariff authority. REUTERS