Trump's tariffs face court challenge in latest trade policy twist

India has been hit with a 50% tariff, while a legal challenge could unravel Trump’s tariff regime

US President Donald Trump calls on a reporter during a cabinet meeting with members of his administration in the Cabinet Room of the White House on August 26, 2025 in Washington, DC
(Image credit: Chip Somodevilla/Getty Images)

Donald Trump’s tariff policy is facing its latest challenge following a US court ruling that the US president had overstepped the powers of his office in imposing the import levies.

A federal appeals court ruled on Friday 29 August that tariffs could not be imposed in response to a national emergency, eradicating the legal basis that Trump had used to bring in the import levies that he has argued are essential to rebalance the order of global trade.

On 2 April, which the president dubbed ‘Liberation Day’, Trump announced a sweeping set of tariffs on all the US’ global trading partners. Their objective was to reduce the country’s trade deficit and boost its domestic industry by ending US reliance on imported goods.

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“It seems unlikely that Congress intended, in enacting IEEPA, to depart from its past practice and grant the president unlimited authority to impose tariffs,” the US Court of Appeals for the Federal Circuit ruled.

Lale Akoner, global market analyst at eToro, observes that the court challenge puts “nearly $300 billion of levies at risk”.

She adds: “While the Supreme Court will ultimately decide, the critical investor question is whether existing tariffs will have to be rebated.”

Why are Trump’s tariffs being contested?

Trump’s tariffs may not have passed a vote in Congress if he had gone down a traditional route with them. Many experts fear that tariffs could harm the US economy as they are effectively a tax paid by domestic businesses and consumers on the goods they import.

The S&P 500 fell 12% in four sessions following 2 April, underscoring their perceived harmful effect. Some Republican lawmakers may have opposed their introduction.

Instead, Trump has declared the perceived imbalance of international trade as great to national security and therefore a national emergency, allowing him (Trump argues) to set tariff policy through executive orders.

This has since been challenged by two court cases brought by small businesses in the US that will see their costs rise dramatically as a result of the tariffs. They contend that IEEPA doesn’t give the president the authority to impose tariffs (which is granted to Congress under Article 1 of the US Constitution) and that, at any rate, trade deficits do not meet the ‘unusual and extraordinary threat’ threshold required by the Act.

A New York federal trade court upheld one of these challenges in May, but the White House has appealed the decision. The Appeals court upheld the original decision (to invalidate the tariffs), but dismissed part of the case that called for tariffs to be removed immediately, instead allowing them to run until 14 October. That gives the US government time to appeal the decision in the US Supreme Court.

If the case is ultimately successful, then not only will the tariffs as they stand at present be removed, but the hundreds of billions of dollars in revenue they have so far raised may have to be refunded.

Not all of Trump’s tariffs will be impacted by the court’s decision. The case refers to the worldwide ‘reciprocal’ tariffs that apply to goods from specific countries. Import rates on particular goods, such as the 50% levy on imports of steel and aluminium, won’t be affected.

India slapped with 50% tariffs

Elsewhere, tariffs on Indian imports to the US were raised to 50% from 25% on 27 August, as relations between Trump and India’s prime minister Narendra Modi start to sour.

The escalation was a response to India’s continued purchasing of oil from Russia. Trump threatened extra sanctions on countries continuing to trade with Russia in the event that a peace deal in Ukraine could not be agreed.

“Both India and the Trump administration are waiting to see who blinks first, but if neither do, then America will push India towards BRICS integration, and longer term significantly impact the relevance of the US dollar,” said Andy Draycott, portfolio manager of the Chikara Indian Subcontinent Fund.

“If Brazil, Russia, India and China – representing 40% of population and GDP, decide America is no longer a reliable partner, how long before they trade in yuan or rupees?”

How high are Trump’s tariffs?

Here are the current tariff rates on the US’s 15 largest trading partners (by share of imports):

Swipe to scroll horizontally

Country

Share of US imports

Rate

Mexico

15.5%

25%

China

13.4%

30%

Canada

12.6%

35%

Germany

4.9%

15%

Japan

4.5%

15%

Vietnam

4.2%

20%

South Korea

4.0%

15%

Taiwan

3.6%

20%

Ireland

3.2%

15%

India

2.7%

50%

Italy

2.3%

15%

United Kingdom

2.1%

10%

Switzerland

1.9%

39%

Thailand

1.9%

19%

France

1.8%

15%

Source: White House. Imports data from US Census Bureau (2024) via BBC

Which goods and commodities have the highest US tariffs?

The tariffs outlined above apply to all goods imports into the US from the given countries. But some categories of strategically-important goods and commodities are subject to individual tariffs, regardless of their point of origin.

Trump says he will impose a 100% tariff on foreign-made semiconductors as he pushes tech firms to invest in the US. Major chipmakers that have made significant investments in America seem to have dodged the new tariff, such as TSMC, SK Hynix and Samsung.

Trump is deciding on the tariff level for pharmaceutical and healthcare imports. He has recently suggested that this could start “small”, then rise to 150% within a year and a half, and to 250% thereafter.

Some commodities have also been subject to individual tariffs. A 50% tariff on copper imports took effect from 1 August. Steel and aluminium imports are already subject to a 50% tariff from most countries, though in the UK’s case this is 25%.

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Dan McEvoy
Senior Writer

Dan is a financial journalist who, prior to joining MoneyWeek, spent five years writing for OPTO, an investment magazine focused on growth and technology stocks, ETFs and thematic investing.

Before becoming a writer, Dan spent six years working in talent acquisition in the tech sector, including for credit scoring start-up ClearScore where he first developed an interest in personal finance.

Dan studied Social Anthropology and Management at Sidney Sussex College and the Judge Business School, Cambridge University. Outside finance, he also enjoys travel writing, and has edited two published travel books.