Court Rules Trump Overstepped Authority on Tariffs, Setting Up Potential $13.7B Refund — Evening Brief – 05.29.25 

The U.S. Court of International Trade ruled that President Donald Trump exceeded his authority by imposing tariffs under the International Emergency Economic Powers Act (IEEPA), delivering a significant setback to the administration’s trade policy.  

The court mandated a halt to the affected tariffs within 10 days, though the White House has already appealed to the U.S. Court of Appeals for the Federal Circuit. Legal experts anticipate the case may escalate to the Supreme Court, which could determine the legality of IEEPA-based tariffs. 

If upheld, the ruling could require the U.S. government to refund approximately $13.7 billion in tariffs collected under IEEPA through April 30, 2025, per U.S. Customs and Border Protection data, with $7.9 billion tied to goods from China and Hong Kong. The decision challenges the use of emergency powers in trade policy, adding uncertainty to U.S. trade enforcement and likely spurring efforts by companies and nations to eliminate sector-specific tariffs.

“The USCIT’s ruling late yesterday adds another layer of uncertainty to the ongoing trade drama,” Bryan Jordan, chief strategist at Cycle Framework Insights, Inc told Connect. “The administration has already announced an appeal and still has other potential avenues through which to pursue the tariffs blocked by the court.”  

“As it stands now, the levies placed on imports from China, Canada, and Mexico earlier this year, along with the baseline 10% rate announced on April 2, will be at least temporarily eliminated within a matter of days, likely setting up another spike in trade activity ahead of any reintroduction in the months ahead. This could also mean a further delay in any action from the Fed, which was already in watch and wait mode given the very wide confidence interval in the outlook,” added Jordan. 

The ruling raises the prospect of retaliatory trade measures or new economic policies, as tariffs were partly justified by efforts to address the U.S. trade deficit and boost government revenue. A potential reduction in tariff income could intensify debates over U.S. debt sustainability, especially as Trump advances expansionary fiscal policies. 

U.S. equites rallied 1% following the court’s decision, aided by strong Q1 earnings from Nvidia, while U.S. Treasuries sold off about five basis points across the curve. The 10-year U.S. swap spread, however, remains elevated at 55 basis points, fueling concerns over fiscal sustainability as Trump pushes an expansionary bill through Congress. The dollar saw a modest bounce, with risk premiums embedded since April starting to ease. However, a significant dollar rally appears unlikely, given ongoing tariff uncertainty and U.S. Treasury market volatility.