A federal court ruled Trump’s tariffs are illegal. Here’s what happens now

Donald Trump’s trade war got a lot more complicated Wednesday evening as a little-known, but powerful, federal court, ruled that Trump had exceeded his authority in imposing tariffs and labeled those “Liberation Day” duties illegal.

That, effectively, will put the majority of the Trump tariffs on hold. (The Trump administration is appealing the ruling.) It’s the latest zig-zag in what has been a dizzying trade war. Since Trump announced the tariffs on April 2, there have been threats, pauses, potential counter tariffs and no end to stock market volatility.

Trump’s frequent walk back of his threats has even led to a new term on Wall Street—the TACO trade, an acronym for “Trump Always Chickens Out.”

So what does this ruling mean for consumers and businesses—and the larger trade war? Here’s what you need to know.

What did the U.S. Court of International Trade rule?

The three-judge panel ruled Trump had exceeded his authority in imposing the tariffs on imported goods under the International Emergency Economic Powers Act (IEEPA). The court said Trump could only use the emergency powers of the IEEPA “to deal with an unusual and extraordinary threat with respect to which a national emergency has been declared.” Most of the tariffs that have been announced fail to meet the requirements of the Act, said the court, which “deal with an unusual and extraordinary threat.”

How long did the court give the Trump administration to reverse course on tariffs?

The judges, who were appointed by Ronald Reagan, Barack Obama and Trump, gave the government 10 days to make the necessary administrative moves to do away with the tariffs.

What does the Trump administration plan to do next?

The White House has made it clear it will appeal this ruling. Trump could ask the Supreme Court to step in and block the ruling as soon as Friday, according to some reports. In the meantime, the Trump administration is seeking an emergency stay, asking the Court of International Trade to delay enforcement of the ruling would cause “immediate irreparable harm to US foreign policy and national security.”

Which tariffs would still be in effect?

While the ruling blocked tariffs applied under the IEEPA, other import taxes, such as those that were imposed under Section 232 of the Trade Expansion Act of 1962, will remain. That means the 25% tariffs on specific products such as automobiles, auto parts, steel and aluminum are still in effect, so prices on most vehicles are likely to stay inflated. In addition, the tariffs on specific items from China that were instituted during Trump’s first term (and were expanded under the Biden administration) will remain in effect.

Could the tariffs be reinstated?

Certainly, if the Trump administration wins its appeal, the tariffs could go back into effect. There are other routes the White House might take as well.

Goldman Sachs notes Trump could use Section 122 of the Trade Act of 1974 to impose tariffs of up to 15%, for up to 150 days. And the U.S. Trade Representative could launch Section 301 investigations on trading partners, which would lay the groundwork for tariffs that have no limits on levels or duration after that investigation is complete.

Could prices still go up?

Because some tariffs remain in place, prices that have already increased are likely to stay higher. And with the added uncertainty of the ruling, retailers are unlikely to make any immediate changes until the White House announces its next course of action. Several retailers, including Walmart, have warned that tariffs will result in higher prices. Trump has lashed out at some of those, telling them to “eat the tariffs”

How has the stock market reacted to the ruling against Trump’s tariffs?

While stocks were broadly higher pre-market (up as much as 500 points on the Dow), the Dow, Nasdaq, and S&P 500 indexes were all largely flat in midday trading, due to the uncertainty that still surrounds tariffs. Traders appear skeptical that we’ve heard the last of tariffs from the Trump administration.