U.S. appeals court reinstates Trump’s tariffs as legal battle reframes global trade war

A U.S. federal appeals court temporarily reinstated President Donald Trump’s sweeping tariffs on imports Thursday, as the White House called on the Supreme Court to step in and Prime Minister Mark Carney welcomed the initial ruling that sought to block the levies.

The Court of Appeals for the Federal Circuit in Washington stayed a ruling by the New York-based U.S. Court of International Trade from the previous day until the appellate court can decide on a request by the Trump administration to leave tariffs in place while the appeals process plays out.

The moves are setting up a legal battle over the centrepiece of Mr. Trump’s wide-ranging global trade war, even as the White House signalled it was exploring other legal avenues for enacting tariffs.

Earlier on Thursday, Mr. Carney welcomed the trade court decision, which found Mr. Trump overstepped his authority by using the International Emergency Economic Powers Act, or IEEPA, to impose tariffs on nearly every country in the world, saying it vindicated Canada’s position.

Mr. Carney said on Thursday the U.S. court’s ruling is consistent with Canada’s long-standing view that the tariffs imposed under the emergency law “were unlawful as well as unjustified.”

“That said, we recognize that our trading relationship with the United States is still profoundly and adversely threatened and affected by similarly unjustified” tariffs, Mr. Carney said, including on steel, aluminum, autos. He also noted the threat of further Trump tariffs on lumber, semiconductors and pharmaceuticals.

That’s why Canada is seeking to negotiate a new arrangement with the United States and diversify its economic relations with other countries, the Prime Minister said.

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The ruling ordered the Trump administration to lift the IEEPA tariffs within 10 days and pay back companies that have already been taxed under the levies. Blocking the tariffs could rob the White House of powerful leverage as it seeks to press other countries into negotiating trade deals favourable to Washington.

Mr. Trump used IEEPA to impose his April 2 “Liberation Day” tariffs of a 10 per cent baseline on most countries plus additional tariffs based on the U.S.’s trade deficit. He also used the law to tariff all Canadian and Mexican products traded outside those countries’ trade pact with the U.S., as well as for some of his tariffs on China, saying these levies were necessary to punish the three countries for not doing enough to stop fentanyl coming to the U.S.

The court found that IEEPA, which says nothing about tariffs, was not intended to be used for this purpose.

The President’s tariffs on autos, steel and aluminum are not affected by the rulings. They were imposed under different legislation, section 232 of the Trade Expansion Act of 1962, which does explicitly grant the power to levy tariffs. Canada is disproportionately affected by these tariffs because of the close integration of its industrial economy with that of the U.S.

Mr. Carney won April’s federal election by campaigning on a plan to reduce the country’s dependency on the U.S., which he painted as increasingly unreliable.

“It therefore remains the top priority of Canada’s new government to establish a new economic and security relationship with the United States and to strengthen our collaboration with reliable trading partners and allies around the world,” Mr. Carney told the House of Commons on Thursday.

On Thursday, U.S. District Court Judge Rudolph Contreras in Washington also ruled against the IEEPA tariffs. The effect of the decision was narrower, however, only ordering an injunction against imposing the levies on two companies that brought suit in his court.

The trade court ruling was the unanimous decision of a three-judge panel, including a jurist appointed by Mr. Trump.

White House press secretary Karoline Leavitt said judges had “brazenly abused their judicial power” and “railroaded” Mr. Trump, and that the administration expected to fight the orders to the Supreme Court.

“The Supreme Court must put an end to this for the sake of our constitution and our country,” she told a press briefing, at which she reprised the administration’s argument that the U.S. trade deficit in goods represents an emergency. “We’ve been ripped off, our middle class has been hollowed out, our manufacturing base has left and gone overseas, jobs have been offshored, and no court did anything about that.”

Ms. Leavitt said the administration was also looking at invoking other legislation to put tariffs in place, signalling an alternative approach if it loses the court fight.

How the Supreme Court would rule on such a case is an open question. While conservatives hold a six-to-three majority, Mr. Trump’s protectionist views on trade are the polar opposite of those held by Reaganite free-traders who once dominated conservative circles.

Since starting his second term in January, Mr. Trump has repeatedly slammed courts that have blocked parts of his agenda. In some high-profile immigration cases, his administration has refused to comply with judicial orders.

On X Thursday, Stephen Miller, one of Mr. Trump’s top advisers, described the trade court ruling as a “judicial coup” and “the end of democracy.” He posted the biographies of the three judges who unanimously struck down the tariffs, writing: “We are living under the judicial tyranny.”

One of the three, Timothy Reif, was an adviser to Mr. Trump’s trade representative during his first term. Mr. Trump then appointed Justice Reif to the bench. The other two justices, Gary Katzmann and Jane Restani, were appointed by presidents Barack Obama and Ronald Reagan, respectively.

Goldy Hyder, CEO of the Business Council of Canada, warned that the trade wars and court battles are creating uncertainty for companies. “The fundamental challenge business leaders face today is shifting trade goalposts, which will continue to be a challenge as this process plays itself out in court,” he said in a statement.

During Mr. Trump’s first term, he leaned heavily on section 232 to implement tariffs. But this and other explicitly trade-related legislation require lengthy processes of review and consultation by the Department of Commerce before the President can enact them. So Mr. Trump turned to IEEPA seeking a faster route for many of his tariffs.

Simon Lester, a Washington-based trade analyst and former World Trade Organization official, said he believed Mr. Trump is going to keep going with his trade agenda despite the court battles. The administration has already started the process of invoking section 232, as well as section 301 of the Trade Act of 1974, for a series of other potential tariffs.

“The administration is just going to bull ahead like it doesn’t matter and, to some extent, it doesn’t, because there are plenty of other avenues they can use for this,” Mr. Lester said in an interview.

In the short term, the courts ruling against Mr. Trump may hurt him by making other governments more reluctant to make concessions on trade. “But in the longer term, we will get to the point where the Trump administration, if they can’t apply tariff pressure this way, they will find a different way.”