A major court decision in Washington, D.C., has cast doubt over the United States’ global tariff plans. A case filed at the International Trade Court by more than a dozen states and small businesses has challenged the legal base of the White House’s trade strategy. This comes just weeks before planned reciprocal tariffs were expected to begin in July. The ruling questions the president’s power to set trade policy and puts pressure on Congress and the Supreme Court to take action.

The case was largely overlooked by the public as attention focused on California Governor Gavin Newsom’s separate lawsuit. But behind the scenes, the Trade Court’s decision delivered a much stronger blow. The ruling questions the legal ground for the 10% universal tariff and points out that only Congress has the right to manage trade under the U.S. Constitution. With this decision, the planned July rollout now appears uncertain.

The decision challenges former President Donald Trump’s use of emergency powers to implement broad and permanent tariffs. Trump had cited national security risks to justify the moves. While emergency powers can be used in urgent cases, the court found the administration applied them too broadly and too often. Legal experts compared Trump’s actions to former President Nixon’s far more limited use of such powers. The court also cited the Federalist Papers to support its view that Congress alone should guide economic decisions of this scale.

One of the key arguments rejected by the court was the idea that tariffs were used to fix trade deficits. The ruling stated that the president cannot simply use emergency laws to make long-term changes in global trade. It also found that applying tariffs to allies like the United Kingdom—where the U.S. actually has a trade surplus—undermines the logic behind the policy. The court further rejected the use of fentanyl-related concerns to justify tariffs on China, Canada, and Mexico, saying the justification did not match the measures.

The administration had claimed that tariffs gave the U.S. leverage in negotiations, but the court said this reasoning was not backed by clear proof. As a result, the long-standing image of Trump’s trade policy as a bold strategy for reshaping global trade is now facing legal defeat.

Meanwhile, international partners have responded with concern. Japan and the European Union have backed away from trade talks with the U.S., citing unstable and unpredictable policies tied to tariffs. U.S. Treasury Secretary Scott Bessent is now struggling to rebuild confidence among key trade allies. The pressure is growing both at home and abroad.

Inside the U.S., retailers have warned of rising prices and product shortages. State governors, including those from Trump’s own party, have expressed concern that the tariff policy is hurting small businesses in their states. The rollback of certain China tariffs, initially meant to ease supply chain problems, has not had the desired effect. Instead, it has raised more questions about the logic behind current trade strategies.

An appeal has already been filed by the White House. However, some insiders suggest that officials may quietly welcome the court’s action as it gives them a reason to reset the policy without admitting failure. In Congress, there seems to be little appetite to support these measures, especially as more businesses report financial stress.

The court also included strong evidence of real-world harm. MicroKits, a small tech firm in Virginia, reported that rising costs could lead to a full shutdown and layoffs. VOS, a wine distributor in New York, said new port tariffs cut deeply into their operating funds. Terry Cycling, a bike company, said it has already lost $25,000 and expects total losses to reach $250,000 by year-end. The court found that the government failed to counter this evidence and failed to prove that the tariffs delivered benefits that outweighed the damage.

The Supreme Court is expected to weigh in on the issue in the near future. Its decision could have a lasting impact on how much power the president has to act on trade matters without Congress. For now, foreign governments are watching closely, sensing that the U.S. trade war strategy may be collapsing from within.

Lobbyists and diplomats may also go back to an older playbook—targeting U.S. industries like bourbon, denim, and motorcycles in key swing states to influence trade policy. If the White House chooses to shift focus, it may turn to section 232 powers, which were used in the past for steel and car tariffs, to pursue more targeted actions.

This court ruling could become a key moment in U.S. economic policy, pulling back a policy built on emergency declarations and restoring trade decisions to Congress. As this legal and political fight plays out, businesses, lawmakers, and global partners will be watching for the next move.