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Trade court ruled Trump exceeded authority under emergency

powers act

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Appeals court orders plaintiffs to respond by June 5,

administration by June 9

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Uncertainty over tariffs impacts trade talks and market

reactions

By Dietrich Knauth and Sarah Marsh

May 29 (Reuters) - A federal appeals court temporarily

reinstated the most sweeping of President Donald Trump's tariffs

on Thursday, a day after a U.S. trade court ruled that Trump had

exceeded his authority in imposing the duties and ordered an

immediate block on them.

The United States Court of Appeals for the Federal Circuit

in Washington said it was pausing the lower court's ruling to

consider the government's appeal, and ordered the plaintiffs in

the cases to respond by June 5 and the administration by June 9.

Wednesday's surprise ruling by the U.S. Court of

International Trade had threatened to kill or at least delay the

imposition of Trump's so-called Liberation Day tariffs on

imports from most U.S. trading partners and additional tariffs

on goods from Canada, Mexico and China. The latter was related

to his accusation that the three countries were facilitating the

flow of fentanyl into the U.S.

The trade court's three-judge panel ruled that the

Constitution gave Congress, not the president, the power to levy

taxes and tariffs, and that the president had exceeded his

authority by invoking the International Emergency Economic

Powers Act, a law intended to address threats during national

emergencies.

Senior Trump administration officials had said they were

undeterred by the trade court's ruling, saying they expected

either to prevail on appeal or employ other presidential powers

to ensure the tariffs go into effect.

Trump has used the threat of charging U.S. importers costly

tariffs for goods from almost every other country in the world

as leverage in international trade talks, a strategy the trade

court's ruling would upend. The trade court ruling had not

interfered with any negotiations with top trading partners that

are scheduled in the days ahead, Trump's administration said.

Trump himself wrote in a statement shared on social

media that he hoped the U.S. Supreme Court would "reverse this

horrible, Country threatening decision" of the trade court,

while lambasting the judicial branch of government as

anti-American.

"The horrific decision stated that I would have to get the

approval of Congress for these Tariffs," Trump wrote on Thursday

evening. "If allowed to stand, this would completely destroy

Presidential Power - The Presidency would never be the same!

This decision is being hailed all over the World by every

Country, other than the United States of America."

Many U.S. trading partners offered careful responses. The

British government said the trade court's ruling was a domestic

matter for the U.S. administration and noted it was "only the

first stage of legal proceedings." Both Germany and the European

Commission, the European Union's executive arm, said they could

not comment on the decision.

Canadian Prime Minister Mark Carney said the trade court's

finding was "consistent with Canada's longstanding position"

that Trump's tariffs were unlawful.

Financial markets, which have whipsawed in response to the

twists and turns in Trump's chaotic trade war, reacted with

cautious optimism to the trade court ruling, though gains in

stocks on Thursday were largely limited by expectations that the

court's ruling faced a potentially lengthy appeals process.

Indeed, analysts said broad uncertainty remained regarding the

future of Trump's tariffs, which have cost companies more than

$34 billion in lost sales and higher costs, according to a

Reuters analysis.

Some sector-specific tariffs, such as on imports of steel,

aluminum and automobiles, were imposed by Trump under separate

authorities on national security grounds and were unaffected by

the ruling.

The Liberty Justice Center, the nonprofit group representing

five small businesses that sued over the tariffs, said the

appeals court's temporary stay was a procedural step.

Jeffrey Schwab, senior counsel for the center, said the

appeals court would ultimately agree with the small businesses

that faced irreparable harm of "the loss of critical suppliers

and customers, forced and costly changes to established supply

chains, and, most seriously, a direct threat to the very

survival of these businesses."

A separate federal court earlier on Thursday also found that

Trump overstepped his authority in using the International

Emergency Economic Powers Act for what he called reciprocal

tariffs of at least 10% on goods from most U.S. trading partners

and for the separate 25% levies on goods from Canada, Mexico and

China related to fentanyl.

That ruling was much narrower, however, and the relief order

stopping the tariffs applied only to the toy company that

brought the case. The administration has appealed that ruling as

well.

UNCERTAINTY PERSISTS

Following a market revolt after his major tariff

announcement on April 2, Trump paused most import duties for 90

days and said he would hammer out bilateral deals with trade

partners.

But apart from a pact with Britain this month, agreements remain

elusive, and the trade court's ruling on the tariffs and the

uncertainty of the appeals process may dissuade countries like

Japan from rushing into deals, analysts said.

"Assuming that an appeal does not succeed in the next few

days, the main win is time to prepare, and also a cap on the

breadth of tariffs - which can't exceed 15% for the time being,"

said George Lagarias, chief economist at Forvis Mazars

international advisers.

The trade court ruling would have lowered the overall

effective U.S. tariff rate to about 6%, but the appellate

court's emergency stay means it will remain at about 15%,

according to estimates from Oxford Research. That is the level

it has been since Trump earlier this month struck a temporary

truce that reduced punishing levies on Chinese goods until late

summer. By contrast, the effective tariff rate had been between

2% and 3% before Trump returned to office in January.

Trump's trade war has shaken makers of everything from luxury

handbags and sneakers to household appliances and cars as the

price of raw materials has risen.

Drinks company Diageo ( DEO ) and automakers General Motors ( GM )

and Ford are among those that have abandoned

forecasts for the year ahead.

Non-U.S. companies including Honda ( HMC ), Campari

, Roche and Novartis have said they

are considering moving operations or expanding their U.S.

presence to mitigate the impact of tariffs.