Federal Trade Court Blocks Trump's Reciprocal Tariffs. What Happens Next?

On Wednesday, the U.S. Court of International Trade blocked steep reciprocal tariffs unilaterally imposed by President Donald Trump on scores of countries in April to correct what he said were persistent trade imbalances.

A panel of three judges from the Court of International Trade ruled that the law Trump used—the International Emergency Economic Powers Act—doesn't give the president the power to impose broad, nationwide tariffs. They stated that Trump's tariff orders went beyond what the law allows.

Which Tariffs Are Affected?

The ruling strikes down several of Trump's most controversial tariffs, including: 1) A 10% global tariff imposed on "Freedom Day." 2)Threatened tariffs on countries that didn't reach trade deals with the U.S. within 90 days. 3) Tariffs on Mexico, Canada, and China, justified by claims they failed to stop drug trafficking and illegal immigration.

However, tariffs imposed under other laws are not affected. These include: 1) Tariffs on steel, aluminum, and cars. 2) Many tariffs from the U.S.-China trade war.

The White House strongly opposed the ruling and has already filed an appeal. A spokesperson said courts shouldn't interfere with the president's decisions during a national emergency. The administration claims the tariffs aimed to fix long-term trade deficits and protect American industry. The case is now going to a higher court and could eventually reach the Supreme Court.

Goldman Sachs noted that the decision blocked a 6.7 percentage point tariff increase this year. They said it's a blow to Trump's tariff plans and adds uncertainty, but it probably won't change outcomes with major U.S. trade partners.

What's Next

Appeal Process Begins – Legal Battle Ahead

Trump's team has already appealed, and the legal fight could last months or even end up at the Supreme Court. The key issue is whether a president can use a "national emergency" to sidestep Congress and impose long-term tariffs, which could shape how future presidents handle global economic policy.

10-Day Countdown: "Reciprocal Tariffs" May Be Halted

The court ordered the government to issue a permanent nationwide ban within 10 calendar days. If no higher court steps in quickly, Trump's "reciprocal tariffs" will be suspended by early June. To keep the policy in place, Trump needs an emergency order from the appeals court. Without it, one of his main tactics—using high tariffs as leverage in trade talks—could be weakened.

Policy Workarounds Possible

Although some tariffs are blocked, the administration still has other legal tools. To keep trade pressure on, Trump might repackage the tariff policy under a different law.

Tariffs on steel, aluminum, and cars are still allowed. Trump has also threatened tariffs on critical sectors like pharmaceuticals and semiconductors—tools he could still use.

Impact on Global Trade Talks

The "reciprocal tariff" policy was a key bargaining chip Trump used in trade talks with 18 countries since April. With this tool now under threat, U.S. negotiating power may weaken, and some talks could stall. U.S. Trade Representative Jamieson Greer warned the ban would hurt America's position at the negotiation table.

What Analysts Say

Frances Cheung (OCBC Bank, Singapore): The ruling temporarily boosted risk appetite in markets, lifting stock futures, bond yields, and the U.S. dollar. However, trade and tariff uncertainties remain. Investors are likely to stay cautious and avoid making heavy bets.

Alec Phillips (Goldman Sachs): The ruling blocks Trump's "Freedom Day" tariffs for now, but this may be only a short-term setback. The administration could use other types of tariffs to achieve similar goals.

Francis Tan (Indosuez Wealth Management): Markets are reacting to good and bad news about future growth. Investors should focus on long-term trends, not short-term headlines. With concerns about U.S. debt and deficits, the dollar may still be undervalued for some time.

Outlook: What to Watch

There are three key things investors should monitor.

Legal Timeline

If the appeals court or Supreme Court acts quickly, Trump may regain time and legal cover to continue the tariffs. He'll have to find a new legal path if the ruling stands.

Alternative Legal Tools

Section 232 (used for national security-related tariffs like those on steel and cars) is broad and fast to deploy. Section 301 takes longer but could have a big impact once implemented. Markets should watch for any new tariff lists that may surface.

Global Reactions

Other countries—especially Europe, Japan, South Korea, and Canada—might use this ruling to push for more balanced trade talks. But if the U.S. stays tough, it could lead to renewed trade tension. Investors should watch the signals of the upcoming G7, G20, and other international meetings.

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