Trump’s tariffs to face major court test brought by US small business owners

Donald Trump’s strategy of imposing sweeping tariffs on America’s main trading partners will face a major test in the US courts on Thursday, four days after the president hailed the “powerful deal” reached with the EU and just hours before a new round of punishing import duties is set to come into effect.

Trump has underpinned his tariff policy with an emergency power that is now being challenged as unlawful in the federal courts. On Thursday the US court of appeals for the federal circuit will hear oral arguments in the case, VOS Selections v Trump.

A group of small business owners are suing the US president on grounds that he lacks legal authority from Congress to impose severe tariffs that could damage their bottom line. The Trump administration has invoked a 1977 law, the International Emergency Economic Powers Act (IEEPA), claiming that various national emergencies – including US trade deficits with trading partners and the scourge of fentanyl trafficking – demand urgent action.

But the plaintiffs have countered that the IEEPA does not give the president the power to impose tariffs, and has never been used in such a way in its almost half a century on the statute books.

The case has the potential to derail Trump’s most significant tariff deals and negotiations, which he has made a centrepiece of his second presidency. Given how much is riding on it, the suit is likely eventually to be settled by the US supreme court under its current 6-3 supermajority of hard-right justices.

In the short term, the challenge under the IEEPA looms as a black cloud over Trump’s desire to claim victory on the tariff front, as his controversial strategy of slapping hefty import duties on major trading partners continues to roil global trade and markets. On Sunday, Trump struck a deal at his golf club in Scotland with the European Commission chief, Ursula von der Leyen, that will see 15% import tariffs on most EU goods entering the US.

Then on Friday, a day after the appeals court hears oral arguments, Trump’s latest round of potentially destabilizing import duties is set to kick in. The targeted countries include some of the biggest suppliers of US imports, including Canada and Mexico.

Trump’s tariff gamble has already been deemed to be illegal by a federal court which ruled in May that the president had overshot his powers under trade laws. That ruling was paused by the appeals court that will be hearing the case on Thursday, pending its decision.

The IEEPA gives the president the authority to regulate transactions with foreign countries, but only under a narrow set of circumstances. In particular, the power can only be wielded where there is an “unusual and extraordinary threat with respect to which a national emergency has been declared”.

The small businesses leading the suit claim that Trump has not met such a rigorous standard, and that his tariffs are thus unlawful.