Dream of Reciprocal Tariffs Shattered? U.S. Court Rules Trump’s Plan Unconstitutional, Revealing New Rifts Between Parties?

TradingKey - On May 28 local time, the U.S. Court of International Trade ruled that former President Donald Trump’s so-called “reciprocal tariff” policy — announced on April 2 (labeled by Trump as "Liberation Day") — is invalid, stating that it violates the U.S. Constitution and constitutes an overreach of executive authority.

The court pointed out that under the U.S. Constitution, the regulation of trade falls within the exclusive legislative authority of Congress. Therefore, the president cannot bypass the legislative process and impose tariff measures under emergency powers, citing the protection of domestic economic interests. This ruling is seen as a major blow to Trump's tariff policies.

The lawsuit was initiated by the non-profit legal organization Liberty Justice Center on behalf of five small businesses affected by the tariffs. Jeffrey Schwab, the attorney for the plaintiffs, argued that Trump’s administration attempted to justify the tariffs using the International Emergency Economic Powers Act (IEEPA), but tariffs are not among the authorities granted under that law. Furthermore, he noted that a "long-term trade deficit" does not constitute an immediate national threat, and therefore does not meet the criteria for declaring a national emergency.

In addition, at least seven lawsuits have now been filed against Trump’s tariff policy. Besides this case, another 13 state-level organizations and small and medium-sized enterprises have also launched similar legal actions.

However, Trump’s team responded swiftly, filing an appeal with the Federal Circuit Court of Appeals within minutes of the ruling. They also submitted evidence indicating that more than USD 700 million in daily tariff revenue would be affected by the court’s decision.

This ruling once again highlights the system of checks and balances embedded in the U.S. separation of powers framework and serves as a warning regarding the legal risks associated with future trade policies of a similar nature.

According to TradingKey analyst Zico Xiao, Trump’s administration remains firmly committed to its tariff policies. If the court’s decision is upheld on appeal, Trump may continue pushing the case all the way to the Supreme Court, or even direct the executive branch to refuse compliance with the court’s injunction.

The timing of the federal court’s sudden halt coincides with the recent submission of the "Big Beautiful" bill by the Trump administration, which barely passed the House of Representatives and is now awaiting Senate review. In Xiao’s view, this incident reflects the deepening political conflict between the two major parties in the United States.

As a result, opinions on this issue remain sharply divided along party lines. A majority of Republican supporters believe the federal court has "overstepped its role in interfering with executive power," while more than 70% of Democrats support the court’s move as a "necessary check on presidential power."

In summary, the core of Trump’s governance strategy lies in "raising tariffs abroad while cutting taxes domestically," with the former serving as the financial foundation for the latter. Tariff revenues help offset losses from reduced corporate tax rates and provide justification for increased defense spending. Analyst Zico Xiao believes that this dispute may ultimately lead to a new compromise on the "Big Beautiful" bill, with Trump possibly revising certain provisions and reaching a deal with Democrats through negotiation and partial concessions.