While Europe slept last night, a legal bombshell exploded over Trump’s trade policy. The U.S. Court of International Trade—America’s specialist federal court with exclusive jurisdiction over trade disputes—delivered what can only be described as a devastating blow to presidential overreach. In simple terms, a three-judge panel told Trump: No, you cannot do this.

This is genuinely remarkable.

The Court of International Trade has traditionally shown considerable deference to presidential trade actions, making this unanimous rebuke all the more significant.

The court found that Trump had exceeded his constitutional authority under the International Emergency Economic Powers Act (IEEPA)—a 1977 law that grants presidents certain emergency powers but, as the judges made crystal clear, does not permit circumventing Congress’s constitutional role in setting tariffs.

The Magnitude of What Just Happened

The implications are massive. The court has blocked Trump’s entire “Liberation Day” programme announced for April 2nd: the 30% tariffs on China, the 25% tariffs on certain Mexican and Canadian goods, and the 10% universal tariffs that would have affected virtually all U.S. imports. The whole edifice has crumbled.

Importantly, however, the ruling does not affect the 25% tariffs on automobiles, auto parts, steel, or aluminium imposed under Section 232 of the Trade Expansion Act. These remain in force, as they were implemented under different legal authority with proper procedural safeguards.

For us Europeans, this is particularly significant. Trump announced 20% tariffs on all EU imports on April 2nd, subsequently suspended for 90 days while threatening to escalate them to 50%. Just two days ago, he was boasting about how his threats had encouraged accelerated EU trade negotiations. Well, that leverage has just evaporated.

Why This Matters Beyond Trade Policy

This ruling means, in principle, that Trump’s ability to arbitrarily adjust tariff rates is finished. If he wants permanent tariff increases, he must pursue legislation through Congress, where securing support for comprehensive trade barriers will prove far more challenging. This could spell the end of Trump’s trade war madness—the most destructive element of his economic policy.

Let me be clear: this is THE MOST POSITIVE DEVELOPMENT IN THE US THIS YEAR.

Market reaction was immediate, though perhaps more muted than one might expect — U.S. equity futures are up 1-1.5% as I write this, with similar gains across Asian markets this morning.

This relatively modest response likely reflects partial anticipation of the ruling and awareness that the Trump administration has already appealed.

But make no mistake—this is profoundly positive. Trump has been significantly constrained, dramatically reducing uncertainty about global trade policy. This doesn’t mean everything is rosy, and I predict markets will soon shift attention to the next problem: the gaping hole in the U.S. federal budget.

A Personal Note on Constitutional Victory

I’m especially pleased to note that my friend Ilya Somin played a pivotal role in this case. As co-counsel with the Liberty Justice Center, Ilya was instrumental in challenging these tariffs and defending constitutional limits on presidential power.

His argument was elegantly simple yet devastatingly effective: “If starting the biggest trade war since the Great Depression based on a law that doesn’t even mention tariffs is not an unconstitutional usurpation of legislative power, I don’t know what is.“

Following yesterday’s ruling, Ilya emphasised that the court “unanimously ruled against this massive power grab by the President.”

This wasn’t just a technical legal victory—it was a triumph for the principle that even presidents must operate within constitutional boundaries.

The Constitutional Economics at Stake

The case, V.O.S. Selections, Inc. v. Trump, consolidated with challenges from twelve states, produced a unanimous verdict from a politically diverse panel: Judge Timothy Reif (Trump appointee), Judge Gary Katzmann (Obama appointee), and Judge Jane Restani (Reagan appointee).

When judges appointed by three different presidents spanning four decades agree, you know the constitutional violation was egregious.

The court’s reasoning cuts to the heart of American constitutional structure. Congress alone has the power to “lay and collect Taxes, Duties, Imposts and Excises” under Article I, Section 8. No president—regardless of claimed emergencies—can usurp this fundamental legislative prerogative.

The judges explicitly rejected the notion that persistent trade deficits constitute the “unusual and extraordinary threat” required to invoke emergency powers.

What’s particularly satisfying from an economic perspective is the court’s recognition that trade imbalances represent “normal ongoing problems” rather than emergencies.

Average U.S. tariff rates had risen from 2.5% to 27% between January and April 2025—a tenfold increase that would make Smoot and Hawley blush. The court understood that accepting Trump’s theory would permanently transfer Congress’s trade powers to the executive branch.

Why Markets Should Celebrate This Constitutional Victory

Policy uncertainty—particularly trade policy uncertainty—acts as a poison for market expectations and business investment. Trump’s arbitrary tariff threats created precisely the kind of regime uncertainty that makes corporate planning impossible and freezes capital allocation decisions.

When businesses cannot predict next quarter’s input costs, they stop investing. When supply chains face constant disruption threats, efficiency collapses.

Yesterday’s ruling doesn’t just constrain Trump; it establishes precedent limiting all future presidents.

The application of the “major questions doctrine” to trade policy means executives cannot make sweeping economic changes without clear congressional authorisation. This return to constitutional order should reduce the trade policy volatility that has plagued global markets since 2017.

This is how constitutional constraints create economic value. By limiting arbitrary executive power, courts reduce the risk premium businesses must factor into every decision. Lower uncertainty means lower required returns, which means higher asset values and more investment. It’s not complicated—it’s basic finance.

What Happens Next

The Department of Justice has appealed to the U.S. Court of Appeals for the Federal Circuit, with the White House predictably declaring that “unelected judges” shouldn’t decide national emergencies.

Supreme Court review seems inevitable given the constitutional stakes. But even if the high court eventually hears the case, the immediate blocking of these tariffs provides crucial breathing room for the global economy.

Today, I celebrate with markets that the US still has checks and balances, that constitutional limits mean something, and that economic sanity can occasionally prevail over populist madness. The fact that my friend Ilya helped architect this victory makes it even sweeter.

Congratulations, Ilya—you’ve literally changed the world for the better. Sometimes David really does defeat Goliath, especially when David has the Constitution on his side