Tariffs court fight threatens Trump’s power to wield his favourite economic weapon

Since returning to power, US President Donald Trump has wielded tariffs – or the threat of them – as his economic weapon of choice.

He has slapped import duties against allies and adversaries alike, and raised their rates to staggeringly high levels, only to change his mind and abruptly pause or reduce the charges.

Markets and global leaders have scrambled trying to guess his next moves, while major retailers have warned of rising prices for American consumers and potentially empty shelves in shops.

The president has claimed this power to impose tariffs unilaterally. He says that as president he is responding to a national economic emergency – and he cannot wait for Congress to pass legislation.

In effect, this meant his finger was constantly poised on one of the most effective triggers of US economic policy. Firing off a threatening missive to a country playing hardball was as easy as posting on Truth Social (just ask the European Union, which he called “very difficult to deal with” in negotiations last week).

However, late on Wednesday, the US Court of International Trade ruled that he had exceeded the authority of the emergency powers he was using. The court gave the White House 10 days to remove almost all tariffs, which it says have been imposed illegally.

The White House appealed, and a federal appeals court has stayed the trade court’s ruling, which means that those tariffs will stay in place – for now.

The administration argued in its appeal that a ruling against Trump “would kneecap the president on the world stage, cripple his ability to negotiate trade deals, imperil the government’s ability to respond to these and future national emergencies”.

On Thursday night, Trump was back on Truth Social, rebuking the lower court judges who had ruled against him, calling their decision “wrong” and “horrible”.

Until now, the power to make or break the economy has rested on his shoulders, as the tariff rates levelled against other countries keep going up and down – seemingly according to Trump’s mood.

He raised the tariffs on imported Chinese goods all the way up to 145% before dropping them down to 30%. A few weeks later he used a social media post to threaten the EU with 50% tariffs, before backing down a couple of days later.

Wall Street analysts have even reportedly now coined the phrase “Taco trade”, referring to their belief that Trump Always Chickens Out from imposing steep import taxes. He looked furious when asked about the acronym in the Oval Office on Wednesday.

“That’s a nasty question” he said, arguing that it was only by making these threats that he got the EU to the negotiating table.

Trump’s ambassador to the EU during his first term, Gordon Sondland, told the BBC this so-called wishy-washy-ness was by design.

“What Trump is doing is exactly what he would do as a business person. He would immediately find a point of leverage to get someone’s attention today. Not next month, not next year… he wants to have these conversations now,” he said earlier this week, before the latest legal twists.

“How do you get someone as intransigent and as slow moving as the EU to do something now? You slap a 50% tariff on them and all of a sudden the phone start ringing.”

If Trump’s tariffs plan continues to meet resistance in the courts, one option at his disposal is asking Congress to legislate the taxes instead. But that would eliminate one of his biggest tools – the element of surprise.

For decades, Trump has been convinced that trade tariffs are the answer to many of America’s economic problems. He has appeared to welcome the prospect of global trade war sparked by his tariff agenda, insisting that it is by raising the price of imported goods and reviving the US manufacturing sector that he will “Make America Great Again”.

Trump touts the money – billions of dollars, not trillions, as he says – that tariffs have already brought in to US government coffers.

The president argues they will help to revive American manufacturing by persuading firms to move their factories to the US to avoid import duties.

However, University of Michigan economics professor Justin Wolfers described Trump’s methods as “madness”.

“If you believe in tariffs, what you want is for businesses to understand that the tariffs are going to… be permanent so that they can make investments around that and that’s what would lead the factories to come to the United States,” he told the BBC.

He said that whatever happens with this court challenge, Trump has already transformed the global economic order.

Prof Wolfers said while Trump “chickens out from the very worst mistakes” – citing his original ‘Liberation Day’ levies and the threat of 50% tariffs on the EU – he doesn’t backflip on everything.

The president wants to keep 10% reciprocal tariffs on most countries and 25% tariffs on cars, steel and aluminium.

“Yes, he backs off the madness, but even the stuff he left in meant that we had the highest tariff rate yesterday than we’d had since 1934,” Prof Wolfers said.

All signs point to this being a fight that the Republican president won’t give up easily.

“You can assume that even if we lose, we will do it another way,” Trump’s trade advisor Peter Navarro said after Thursday’s appeals court ruling.

While the litigation plays out, America’s trade partners will be left guessing about Trump’s next move, which is exactly how he likes it.