Image source, Reuters

By raising tariffs on goods entering the US, Trump says he can encourage domestic manufacturing and US consumers to buy more American-made goods, raise tax revenues, and address what he claims are unfair trade practices by other nations.

The US has a trade deficit - meaning it buys more than it sells - and Trump has long argued that this is harmful for the country.

Many of Trump's claims about the impact of tariffs have been contested, and experts have warned that because tariffs are additional taxes, they will increase the price of goods for US consumers.

It has also been argued that tariffs are a negotiating tactic, and that the mere threat of them will mean other countries make trade or other concessions to the US in order to avoid them.

That's because, even though the US importer will pay the tariff, the increased cost makes it likely fewer goods will be sold, which ultimately will be bad for business for those selling into the US market.

This court ruling now casts Trump's strategy into uncertainty.

Vishala Sri-Pathma
Business reporter

UK financial markets are now open and are in positive territory, as expected. The FTSE 100 is up about 0.3%.

The pound is a little lower, down 0.1% and trading between $1.34 and $1.35 - the news that Trump’s tariffs could be unlawful has seen the dollar gain strength.

Simon Jack
Business editor

Image source, Getty Images

The fact that a US court has struck down the legal basis for Donald Trump's tariff war has left business leaders, trade experts and government negotiators scrambling to understand its significance.

Simply put, the court decided you can't use national security legislation to impose tariffs willy-nilly on everything from tea to trainers.

On the face of it, pretty much everything Donald Trump announced in the White House garden with his big sign is illegal, according to a Manhattan-based trade court - including the universal tariff of 10% on everything and everyone with some exceptions.

However, some tariffs which have been subject to a thorough process - such as steel, aluminium and cars - will not be affected by this ruling.

Vishala Sri-Pathma
Business reporter

With markets due to open in London soon, let's take a look at how Asia has responded to events in the US.

In Japan the Nikkei 225 index rose by 1.9%, and Hong Kong’s Hang Seng was up by 1.1%. The South Korean Kospi index rallied by 1.8%.

Here in Europe, markets are poised to open in positive territory.

“It’s been a volatile trading period, this news has improved financial market sentiment, particularly towards US assets,” Emma Moriarty, Portfolio Manager at CG Asset Management told BBC Radio 4’s Today programme.

“We’re seeing the dollar strengthening, futures contracts on the main US indexes showing gains, led by the Asian markets.”

Sarah Smith
North America editor

This ruling is a serious blow to one of Donald Trump's key economic policies that he has aggressively pursued for the last two months.

He claimed he had the power to impose trade tariffs because he was responding to a national emergency when it came to the US economy, and that he did not need to wait for legislation from Congress to apply import taxes on goods coming in from other countries.

But the US Court of International Trade has ruled that he exceeded the authority of the emergency powers he was using, and the court has given the White House 10 days to complete the process of removing almost all tariffs, which it says have been imposed illegally.

Within minutes the Trump istration filed an appeal, and that means a legal battle will now ensue in higher courts before it becomes clear whether Trump can unilaterally impose import tariffs.

It throws into chaos all the ongoing trade negotiations with dozens of countries, and potentially curtailing his economic weapon of choice.

The White House immediately challenged the court's ruling blocking Trump's central economic policy, but we're yet to hear a direct response from the president himself.

However, during a White House event earlier held before the ruling was published, Trump was asked about a nickname given to him by some critics on Wall Street: Taco - which stands for "Trump always chickens out".

Since returning to office for a second time, Trump has repeatedly changed his stance on tariffs - for instance, rates on China have been slashed from 145% to 30%.

Trump said "it's called negotiation" when asked about his changing stance on tariff rates, and accused a reporter of asking a "nasty question".

We are getting more market reaction from the Asia Pacific, where the region's major currencies have weakened on of the stronger US dollar.

The MSCI index of emerging market currencies was down 0.2%. The Singapore dollar fell 0.7% while the Malaysian ringgit and Thai baht both fell 0.4%.

The Australian dollar slipped 0.2% while the New Zealand dollar fell 0.5%.

Investors are buying the US dollar as they see the legal setback to Donald Trump's sweeping tariffs as a respite from his unpredictable trade policies, analysts say.

"The ruling removes an immediate overhang, even if it is not the final word on tariffs," said Charu Chanana, chief investment strategist at Saxo.

Image source, EPA

In a line: A US federal court has blocked President Donald Trump's sweeping tariffs, in a major blow to a key part of his economic plan.

How it happened: The Court of International Trade ruled that an emergency law invoked by the White House does not give the president unilateral authority to impose tariffs on nearly every country.

The Manhattan-based court said the US Constitution gives Congress exclusive powers to regulate commerce with other nations and this is not superseded by the president's remit to safeguard the economy.

The court also blocked a separate set of levies the Trump istration imposed on China, Mexico and Canada, which were in response to what the White House said was the unacceptable flow of drugs and illegal immigrants into the US.

What's not included: Steel and aluminium tariffs are not affected, as they fall under a different law.

How the White House reacted: "It is not for unelected judges to decide how to properly address a national emergency," the White House said as it launched an appeal against the ruling.

What next? The ruling gave the White House 10 days to complete the bureaucratic process of halting the tariffs - although the higher rates are suspended until July, a blanket 10% rate for most countries is still in place.

The immediate implications of the court's ruling are unclear. The case needs to go through the appeals process - a higher court might be more Trump-friendly.

Former US under-secretary for international trade, Frank Lavin, has described this ruling as a "big setback" for Trump.

Lavin, who held the role from 2005 to 2007 during the Bush istration, told the BBC that the courts decision "diminishes the leverage" that President Trump has in trade negotiations.

"It's not going to be a major reordering of international trade. It's not going to address the trade deficit and the United States is going to end up more or less where it started," he said.

Lavin also gave his view on how the president will likely respond to the court ruling.

"This allows him to blame the judiciary for whatever problems might arise. He still will claim victory and claim he's on the right track."

Image source, Reuters

The court has given the White House 10 days to complete the bureaucratic process of halting the tariffs - although most are currently suspended anyway.

But the court's ruling needs to go through an appeals process - including potentially all the way to the Supreme Court.

If all courts do uphold the ruling, businesses who've had to pay tariffs will receive refunds on the amounts paid, with interest.

These include the so-called reciprocal tariffs, which were lowered to 10% across the board for most countries and were raised to 145% on Chinese products, now 30%.

Since the ruling was announced we have had a statement from the Liberty Justice Center, a nonpartisan organisation in Austin that represented five owner-operated businesses which took the case.

Jeffrey Schwab, senior counsel at the group, said the ruling "reaffirms that the president must act within the bounds of the law".

"It protects American businesses and consumers from the destabilising effects of volatile, unilaterally imposed tariffs,” he said.

Ilya Somin, co-counsel in the case, also hailed the court's ruling against the "massive power grab by the president".

"The ruling emphasises that he was wrong to claim a virtually unlimited power to impose tariffs, that IEEPA law (the International Emergency Economic Powers Act) doesn’t grant any such boundless authority, and that it would be unconstitutional if it did."

This most recent legal challenge to President Trump's tariffs comes from a group of US businesses led by family-owned wine importer VOS Selections.

The New York-based company said the tariffs "jeopardize not only our business, but the livelihoods of the family farmers we represent".

Some of the other businesses involved in the legal challenge include an online cycling store based out of Vermont and a small electronics manufacturer in Charlottesville, Virginia.

The political reaction in the US was swift, with Democrats celebrated the court ruling.

“I argued from the start that Donald Trump’s claim that he could simply decree sky-high new taxes on imported goods depended on mangling the Constitution beyond recognition,” said Ron Wyden, the senator from Oregon.

Gregory W Meeks, the top Democrat on the House Foreign Affairs Committee, said the ruling confirmed what had long been known - that "these tariffs are an illegal abuse of executive power."

"Trump's declaration of a bogus national emergency to justify his global trade war was an absurd and unlawful use of IEEPA," he added.

However Republican Stephen Miller, one of Trump's closest White House aides, described the ruling on X as a "judicial coup" that he said was "out of control."

White House spokesperson Kush Desai also said it was "not for unelected judges to decide how to properly address a national emergency".

Image source, Reuters

Image source, Truth Social

Trump has not yet commented directly on the court ruling but has posted memes on his Truth Social platform that may allude to the announcement.

One black and white image, apparently created with AI, shows the president walking towards the camera with the words "HE'S ON A MISSION FROM GOD & NOTHING CAN STOP WHAT IS COMING".

Another image of a billboard says "PRESIDENT TRUMP WAS RIGHT ABOUT EVERYTHING".

A bit of international reaction now.

Hong Kong Financial Secretary Paul Chan has said the court ruling could "at least bring President Trump to reason".

Earlier this month, Chan said that US tariffs had left "major uncertainties over the economic outlook" for Hong Kong.

James Chater
Reporting from Sydney

A short time ago I was speaking to Nick Marro, Principal Economist for Asia at the Economist Intelligence Unit.

He explained that Asian economies will see the court's decision as "broadly positive".

"For economies that have more diversified export baskets, this is a reprieve," Marro said.

"But that's not everyone," he added.

Marro said that economies that are reliant on automobile or electronics exports, like South Korea and Taiwan, could still be "held hostage" to US tariff investigations into specific sectors.

Whatever happens next, the ruling "preserves and heightens this question of uncertainty" around the Trump istration, he said.

Katie Silver
Business reporter, Singapore

I’ve just been speaking with a former top official at the Customs Border Protection Agency who told me they’ll be no change at the border just yet, tariffs will still be paid.

It needs to go through the appeals process then, if successful, the CBP will issue directions to its officers.

There’s a long way to go yet. And indeed, a higher court might be more Trump-friendly.

If all courts do uphold the ruling, businesses who’ve had to pay tariffs will receive refunds on the amounts paid, with interest.

These include the so-called reciprocal tariffs, which were lowered to 10% across the board for most countries and were up to almost 150% on Chinese products, now 30%.

John Leonard, who was until recently high up at the CBP, said the law Trump used to justify reciprocal tariffs (the IEEPA) was an obscure law from the 1970s. It was dug up during Leonard’s time at the CBP in 2019 to justify tariffs against Mexico.

Steel and aluminium tariffs fall under a different law (Section 232) and aren’t impacted by today’s ruling.

Global markets are clearly liking the New York court's ruling.

Futures in the S&P 500 and Nasdaq rose when it was first announced. Futures are agreements to buy or sell an asset - like a commodity or stock - at a set price in the future.

Oil prices also gained, with Brent crude and US West Texas Intermediate crude both rising by more than 1.25% to a barrel, according to the Reuters news agency.

In Asia, Japan's Nikkei has been trading 1.5% up in early trade, with South Korea's Kospi up about 1%.

Most other markets are in the green but not hugely.

So why did Trump impose these tariffs to begin with?

Tariffs are taxes charged on goods bought from other countries. Typically, they are a percentage of a product's value. So a 10% tariff means a $10 product would have a $1 tax on top - taking the total cost to $11 (£8.18).

Companies which bring foreign goods into the US have to pay the tax to the government - and may some or all of the extra cost on to customers. Firms may also decide to import fewer goods.

Trump believes tariffs will encourage Americans to buy more US-made products, increase the amount of tax raised and lead to huge levels of investment.

However, the levies drew an international backlash. In April, the International Monetary Fund (IMF) downgraded its prediction for global economic growth in 2025 as a result of the tariffs. It expected America to be hardest hit, and said a US recession was now more likely in 2025.

Image source, EPA