trade deficit

WASHINGTON — President Trump has audaciously claimed virtually unlimited power to bypass Congress and impose sweeping taxes on foreign products.

Now a federal appeals court has thrown a roadblock in his path, ruling that he is violating the law.

The U.S. Court of Appeals for the Federal Circuit ruled Friday that Trump went too far when he declared national emergencies to justify imposing sweeping import taxes on almost every country.

The ruling largely upheld a May decision by a specialized federal trade court in New York. But the 7-4 appeals court decision tossed out a part of that ruling that would have overturned the tariffs immediately, allowing the Trump administration time to appeal to the U.S. Supreme Court.

The ruling was a big setback for Trump, whose trade policies have rocked financial markets, paralyzed businesses with uncertainty and raised fears of higher prices and slower economic growth.

Which tariffs did the court knock down?

The court’s decision centers on the tariffs — export taxes — Trump imposed in April on almost all U.S. trading partners and levies he imposed before that on China, Mexico and Canada.

Trump on April 2 — “Liberation Day,” he called it — imposed so-called reciprocal tariffs of up to 50% on countries with which the United States runs a trade deficit and 10% baseline tariffs on almost everybody else.

The president later suspended the reciprocal tariffs for 90 days to give countries time to negotiate trade agreements with the United States — and reduce their barriers to American exports. Some of them did — including the United Kingdom, Japan and the European Union — and agreed to lopsided deals with Trump to avoid even bigger tariffs.

Those that didn’t knuckle under — or otherwise incurred Trump’s wrath — got hit harder this month. Laos got rocked with a 40% tariff, for instance, and Algeria with a 30% levy. Trump also kept the baseline tariffs in place.

Claiming extraordinary power to act without congressional approval, Trump justified the taxes under the 1977 International Emergency Economic Powers Act, or IEEPA, by declaring the United States’ long-standing trade deficits “a national emergency.”

In February, he’d invoked the law to impose tariffs on Canada, Mexico and China, saying that the illegal flow of immigrants and drugs into the U.S. amounted to a national emergency and that the three countries needed to do more to stop it.

The U.S. Constitution gives Congress the power to set taxes, including tariffs. But lawmakers have gradually let presidents assume more power over tariffs — and Trump has made the most of it.

The court challenge does not cover other Trump tariffs, including levies on foreign steel, aluminum and autos that the president imposed after Commerce Department investigations concluded that those imports were threats to U.S. national security.

Nor does it include tariffs that Trump imposed on China in his first term — and President Biden kept — after a government investigation concluded that Beijing used unfair practices to give its technology firms an edge over rivals from the United States and other Western countries.

Why did the court rule against the president?

The administration had argued that courts had approved President Nixon’s emergency use of tariffs in the economic chaos that followed his decision to end a policy that linked the U.S. dollar to the price of gold. The Nixon administration successfully cited its authority under the 1917 Trading With the Enemy Act, which preceded and supplied some of the legal language used in the IEEPA.

In May, the U.S. Court of International Trade in New York rejected the argument, ruling that Trump’s April 2 tariffs “exceed any authority granted to the President’’ under the emergency powers law. In reaching its decision, the trade court combined two challenges — one by five businesses and one by 12 U.S. states — into a single case.

On Friday, the federal appeals court wrote in its 7-4 ruling that “it seems unlikely that Congress intended to … grant the President unlimited authority to impose tariffs.”

A dissent from the judges who disagreed with Friday’s ruling clears a possible legal path for Trump, concluding that the 1977 law allowing for emergency actions “is not an unconstitutional delegation of legislative authority under the Supreme Court’s decisions,” which have allowed Congress to grant some tariff authorities to the president.

So where does this leave Trump’s trade agenda?

The government has argued that if Trump’s tariffs are struck down, it might have to refund some of the import taxes that it’s collected, delivering a financial blow to the U.S. Treasury. Revenue from tariffs totaled $159 billion by July, more than double what it was at the same point the year before. Indeed, the Justice Department warned in a legal filing this month that revoking the tariffs could mean “financial ruin” for the United States.

It could also put Trump on shaky ground in trying to impose tariffs going forward.

“While existing trade deals may not automatically unravel, the administration could lose a pillar of its negotiating strategy, which may embolden foreign governments to resist future demands, delay implementation of prior commitments, or even seek to renegotiate terms,” Ashley Akers, senior counsel at the Holland & Knight law firm and a former Justice Department trial lawyer, said before the appeals court decision.

The president promptly said he would appeal the ruling to the Supreme Court. “If allowed to stand, this Decision would literally destroy the United States of America,” he wrote on his social media platform.

Trump does have alternative laws for imposing import taxes, but they would limit the speed and severity with which he could act.

For instance, in its decision in May, the trade court noted that Trump retains more limited power to impose tariffs to address trade deficits under another statute, the Trade Act of 1974. But that law restricts tariffs to 15% and to just 150 days on countries with which the United States runs big trade deficits.

The administration could also invoke levies under a different legal authority — Section 232 of the Trade Expansion Act of 1962 — as it did with tariffs on foreign steel, aluminum and autos. But that requires a Commerce Department investigation and cannot be imposed merely at the president’s own discretion.

Wiseman and Whitehurst write for the Associated Press.

WASHINGTON — President Trump’s tariff onslaught this week left a lot of losers — from small, poor countries such as Laos and Algeria to wealthy U.S. trading partners such as Canada and Switzerland. They’re now facing especially hefty export taxes — tariffs — on the products they export to the U.S. starting Thursday.

The closest thing to winners may be the countries that succumbed to Trump’s demands — and avoided even more pain. But it’s unclear whether anyone will be able to claim victory in the long run — even the United States, the intended beneficiary of Trump’s protectionist policies.

“In many respects, everybody’s a loser here,’’ said Barry Appleton, co-director of the Center for International Law at the New York Law School.

Barely six months after he returned to the White House, Trump has demolished the old global economic order. Gone is one built on agreed-upon rules. In its place is a system in which Trump himself sets the rules, using America’s enormous economic power to punish countries that won’t agree to one-sided trade deals and extracting huge concessions from the ones that do.

“The biggest winner is Trump,” said Alan Wolff, a former U.S. trade official and deputy director-general at the World Trade Organization. “He bet that he could get other countries to the table on the basis of threats, and he succeeded — dramatically.’’

Everything goes back to what Trump calls “Liberation Day’’ — April 2 — when the president announced “reciprocal’’ taxes of up to 50% on imports from countries with which the United States ran trade deficits and 10% “baseline’’ taxes on almost everyone else.

He invoked a 1977 law to declare the trade deficit a national emergency that justified his sweeping import taxes. That allowed him to bypass Congress, which traditionally has had authority over taxes, including tariffs — all of which is now being challenged in court.

‘Winners’ still paying higher tariffs

Trump retreated temporarily after April announcement triggered a rout in financial markets and suspended the reciprocal tariffs for 90 days to give countries a chance to negotiate.

Eventually some of them did, acceding to Trump’s demands to pay what four months ago would have seemed unthinkably high tariffs to maintain their ability to sell to the vast American market.

The United Kingdom agreed to 10% tariffs on its exports to the United States — up from 1.3% before Trump amped up his trade war with the world. The U.S. demanded concessions even though it had run a trade surplus, not a deficit, with the U.K. for 19 straight years.

The European Union and Japan accepted U.S. tariffs of 15%. Those are much higher than the low-single-digit rates they paid last year, but lower than the tariffs he was threatening — 30% on the EU and 25% on Japan.

Also cutting deals with Trump and agreeing to hefty tariffs were Pakistan, South Korea, Vietnam, Indonesia and the Philippines.

Even countries that saw their tariffs lowered from April without reaching a deal are still paying much higher tariffs than before Trump took office. Angola’s tariff, for instance, dropped to 15% from 32% in April, but in 2022 it was less than 1.5%.

And while the Trump administration cut Taiwan’s tariff to 20% from 32% in April, the pain will still be felt by a U.S. ally that China claims as its territory.

“Twenty percent from the beginning has not been our goal. We hope that in further negotiations we will get a more beneficial and more reasonable tax rate,” Taiwan’s President Lai Ching-te told reporters in Taipei on Friday.

Trump also agreed to reduce the tariff on the tiny southern African kingdom of Lesotho to 15% from the 50% he’d announced in April, but the damage may already have been done there.

Brazil, Canada, Switzerland

Countries that didn’t knuckle under — and those that found other ways to incur Trump’s wrath — got hit harder.

Even some of the poor were not spared. Laos’ annual economic output comes to $2,100 per person and Algeria’s $5,600 — versus America’s $75,000. Nonetheless, Laos got rocked with a 40% tariff and Algeria with a 30% levy.

Trump slammed Brazil with a 50% import tax largely because he didn’t like the way it was treating former Brazilian President Jair Bolsonaro, a close Trump ally who is facing trial for trying to overturn his electoral loss and inspiring a riot in the capital in 2023 — recalling Trump’s role in the Jan. 6. insurrection two years earlier at the U.S. Capitol.

Never mind that the U.S. has exported more to Brazil than it’s imported every year since 2007.

Trump’s decision to plaster a 35% tariff on long-standing U.S. ally Canada was partly designed to threaten Ottawa for saying it would recognize a Palestinian state in light of the humanitarian crisis in the Gaza Strip. Trump is a staunch supporter of Israeli Prime Minister Benjamin Netanyahu.

Switzerland was clobbered with a 39% import tax — even higher than the 31% Trump announced on April 2.

“The Swiss probably wish that they had camped in Washington’’ to make a deal, said Wolff, now a senior fellow at the Peterson Institute for International Economics. “They’re clearly not at all happy.’’

Fortunes may change if Trump’s tariffs are upended in court. Five American businesses and 12 states are suing the president, arguing that his April 2 tariffs exceeded his authority under the 1977 law.

In May, the U.S. Court of International Trade, a specialized court in New York, agreed and blocked the tariffs, although the government was allowed to continue collecting them while its appeal wends its way through the legal system, and may end up at the Supreme Court. In a hearing Thursday, the judges on the U.S. Court of Appeals for the Federal Circuit sounded skeptical about Trump’s justifications for the tariffs.

“If [the tariffs] get struck down, then maybe Brazil’s a winner and not a loser,’’ Appleton said.

$2,400 bill for U.S. households

Trump portrays his tariffs as a tax on foreign countries. But they are actually paid by import companies in the U.S. who typically pass along the cost to their customers via higher prices. True, tariffs can hurt other countries by forcing their exporters to cut prices and sacrifice profits — or risk losing market share in the United States.

But economists at Goldman Sachs estimate that overseas exporters have absorbed just one-fifth of the rising costs from tariffs, while Americans and U.S. businesses have picked up the most of the tab.

Walmart, Procter & Gamble, Ford, Best Buy, Adidas, Nike, Mattel and Stanley Black & Decker have all raised prices due to U.S. tariffs.

“This is a consumption tax, so it disproportionately affects those who have lower incomes,” Appleton said. “Sneakers, knapsacks … your appliances are going to go up. Your TV and electronics are going to go up. Your video game devices, consoles are going to up because none of those are made in America.’’

Trump’s trade war has pushed the average U.S. tariff from 2.5% at the start of 2025 to 18.3% now, the highest since 1934, according to the Budget Lab at Yale University. And that will impose a $2,400 cost on the average household, the lab estimates.

“The U.S. consumer’s a big loser,″ Wolff said.

Wiseman writes for the Associated Press. AP writer Christopher Rugaber contributed to this report.

WASHINGTON — President Trump announced a trade deal with Vietnam on Wednesday that would allow U.S. goods to enter the country duty-free.

Vietnamese exports to the United States, by contrast, would face a 20% levy.

On his Truth Social platform, Trump declared the pact “a Great Deal of Cooperation between our two Countries.’’

In April, Trump announced a 46% tax on Vietnamese imports — one of his so-called reciprocal tariffs targeting dozens of countries with which the United States runs trade deficits. Trump promptly suspended the reciprocal tariffs for 90 days to allow for negotiations like the one with Vietnam. The pause expires Tuesday, but so far the Trump administration has reached a trade agreement with only one of those countries — the United Kingdom. (Trump has also reached a “framework’’ agreement with China in a separate trade dispute.)

“Vietnam has been very keen to get out from under this,’’ said Mary Lovely, senior fellow at the Peterson Institute for International Economics. “This is forcing a smaller country to eat it, basically. We can do that. It’s the big countries that everybody’s keeping their eyes on.’’ She doubts that Trump will be able to impose such a lopsided agreement on big trading partners such as the European Union and Japan.

The United States last year ran a $122-billion trade deficit with Vietnam. That was the third-biggest U.S. trade gap — the difference between the goods and services it buys from other countries and those it sells them — behind the ones with China and Mexico.

In addition to the 20% tariffs, Trump said the U.S. would impose a 40% tax on “transshipping’’ — goods from another country that stop in Vietnam on their way to the United States. Washington complains that Chinese goods have been dodging higher U.S. tariffs by transiting through Vietnam.

A February study in the Harvard Business Review found that there was “much less rerouting than previously believed.’’

In May, Vietnam approved a $1.5-billion project by the Trump Organization and a local partner to build a massive golf resort complex near Hanoi, covering an area roughly the size of 336 football fields.

Vietnam was a beneficiary of American efforts to counter China’s influence. Companies looking to diversify supply chains away from China flocked to Vietnam.

In 2023, it became the only country to host both former President Joe Biden and Chinese leader Xi Jinping on state visits. That year, the U.S. upgraded Vietnam to its highest diplomatic status — comprehensive strategic partner — placing it on par with China and Russia.

Wiseman and Ghosal write for the Associated Press. Ghosal reported from Hanoi, Vietnam.

FRANKFURT, Germany — Top officials at the European Union’s executive commission say they’re pushing hard for a trade deal with the Trump administration to avoid a 50% tariff on imported goods. Trump had threatened to impose the tariffs on June 1, but has pushed back the deadline to July 9, repeating an oft-used tactic in his trade war.

European negotiators are contending with Trump’s ever-changing and unpredictable tariff threats, but “still, they have to come up with something to hopefully pacify him,” said Bruce Stokes, visiting senior fellow at the German Marshall Fund of the United States.

Stokes also sees more at play than just a disagreement over trade deficits. Trump’s threats “are rooted in frustration with the EU that has little to do with trade,’’ Stokes said. “He doesn’t like the EU. He doesn’t like Germany.”

What exactly does Trump want? What can Europe offer? Here are the key areas where the two sides are squaring off.

Buy our stuff

Over and over, Trump has bemoaned the fact that Europe sells more things to Americans than it buys from Americans. The difference, or the trade deficit in goods, last year was 157 billion euros ($178 billion). But Europe says that when it comes to services — particularly digital services like online advertising and cloud computing — the U.S. sells more than it buys and that lowers the overall trade deficit to 48 billion euros, which is only about 3% of total trade. The European Commission says that means trade is “balanced.”

One way to shift the trade in goods would be for Europe to buy more liquefied natural gas by ship from the U.S. To do so, the EU could cut off the remaining imports of Russian pipeline gas and LNG. The commission is preparing legislation to force an end to those purchases — last year, some 19% of imports — by the end of 2027.

That would push European private companies to look for other sources of gas such as the U.S. However the shift away from Russia is already in motion and that “has obviously not been enough to satisfy,” said Laurent Ruseckas, a natural gas markets expert at S&P Global Commodities Insights Research.

The commission doesn’t buy gas itself but can use “moral suasion” to convince companies to turn to U.S. suppliers in coming years but “this is no silver bullet and nothing that can yield immediate results,” said Simone Tagliapietra, an energy analyst at the Bruegel think tank in Brussels.

Europe could buy more from U.S. defense contractors as part of its effort to deter further aggression from Russia after the invasion of Ukraine, says Carsten Brzeski, global chief of macro at ING bank. If European countries did increase their overall defense spending — another of Trump’s demands — their voters are likely to insist that the purchases go to defense contractors in Europe, not America, said Stokes of the German Marshall Fund. One way around that political obstacle would be for U.S. defense companies to build factories in Europe, but “that would take time,’’ he said.

The EU could also reduce its 10% tax on foreign cars— one of Trump’s long-standing grievances against Europe. “The United States is not going to export that many cars to Europe anyway … The Germans would be most resistant, but I don’t think they’re terribly worried about competition from America,’’ said Edward Alden, senior fellow at the Council on Foreign Relations. ”That would be a symbolic victory for the president.’’

A beef over beef

The U.S. has long complained about European regulations on food and agricultural products that keep out hormone-raised beef and chickens washed with chlorine. But experts aren’t expecting EU trade negotiators to offer any concessions at the bargaining table.

“The EU is unwilling to capitulate,” said Mary Lovely, senior fellow at the Peterson Institute for International Economics. “The EU has repeatedly said it will not change its sanitary rules, its rules on (genetically modified) crops, its rules on chlorinated chickens, things that have been longtime irritants for the U.S.’’

Backing down on those issues, she said, would mean that “the U.S. gets to set food safety (standards) for Europe.’’

Value-added tax

One of Trump’s pet peeves has been the value-added taxes used by European governments, a tax he says is a burden on U.S. companies.

Economists say this kind of tax, used by some 170 countries, is trade-neutral because it applies equally to imports and exports. A value-added tax, or VAT, is paid by the end purchaser at the cash register but differs from sales taxes in that it is calculated at each stage of the production process. In both cases, VAT and sales tax, imports and exports get the same treatment. The U.S. is an outlier in that it doesn’t use VAT.

There’s little chance countries will change their tax systems for Trump and the EU has ruled it out.

Negotiating strategy

Trump’s approach to negotiations has involved threats of astronomical tariffs – up to 145% in the case of China – before striking a deal for far lower levels. In any case, however, the White House has taken the stance that it won’t go below a 10% baseline. The threat of 50% for the EU is so high it means “an effective trade embargo,” said Brzeski, since it would impose costs that would make it unprofitable to import goods or mean charging consumers prices so high the goods would be uncompetitive.

Because the knottiest issues dividing the EU and U.S. — food safety standards, the VAT, regulation of tech companies — are so difficult “it is impossible to imagine them being resolved by the deadline,’’ Alden said. ”Possibly what you could have — and Trump has shown he is willing to do this — is a very small deal’’ like the one he announced May 8 with the United Kingdom.

Economists Oliver Rakau and Nicola Nobile of Oxford Economics wrote in a commentary Monday that if imposed, the 50% tariffs would reduce the collective economy of the 20 countries that use the euro currency by up to 1% next year and slash business investment by more than 6%.

The EU has offered the US a “zero for zero” outcome in which tariffs would be removed on both sides industrial goods including autos. Trump has dismissed that but EU officials have said it’s still on the table.

Lovely of the Peterson Institute sees the threats and bluster as Trump’s way of negotiating. “In the short run, I don’t think 50% is going to be our reality.’’

But she says Trump’s strategy adds to the uncertainty around U.S. policy that is paralyzing business. “It suggests that the U.S. is an unreliable trading partner, that it operates on whim and not on rule of law,’’ Lovely said. “Friend or foe, you’re not going to be treated well by this administration.’’

McHugh and Wiseman write for the Associated Press. Wiseman contributed to this report from Washington.