CNN
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President Donald Trump’s sweeping tariffs — both those he has threatened and those he has already enacted — have led many economists and American consumers to predict that the US economy could enter a recession while also pushing up inflation.
But a federal court’s ruling late Wednesday that found Trump exceeded his authority to impose many tariffs could significantly disrupt the president’s trade agenda — and potentially even nullify tariffs that are already in effect.
The White House immediately appealed the ruling. A federal appeals court on Thursday ruled the tariffs being challenged can remain in effect while the case is being heard, which could potentially work its way up to the Supreme Court.
Ultimately, if the block on tariffs holds, it could make a sizable dent in the economic outlook — with an emphasis on could.
“The chances for a major slowdown because of the tariffs or a major consumer price increase definitely have gone down a little bit, not to zero because God knows what they’re going to do,” said Norbert Michel, vice president and director at the Cato Institute’s Center for Monetary and Financial Alternatives, referring to legal actions the Trump administration can take.
Trump’s tariffs could hurt the US economy, given other nations could respond by tariffing American goods, which in turn could cost businesses foreign customers and result in layoffs. Indeed, Canada and China already have.
Economists have also predicted that the turbulence of the back-and-forth on tariffs will cause more businesses to stall investment plans and push consumers to spend less money if prices go up and fewer people are employed.
The risks of a recession have gone down slightly if the tariffs being challenged cannot remain in effect, Michel told CNN.
One reason is that the court’s ruling doesn’t apply to all the tariffs Trump has imposed. The ones that could be halted are blanket across-the-board tariffs on all US imports from other countries. That includes the 30% tariff in place on Chinese goods shipped to the US as well as the 10% tariff applicable to most other countries’ imports. It would also prevent the “reciprocal” tariffs on dozens of nations Trump unveiled on April 2, which are currently on pause until July 9, from resuming. The 54% tariff on goods worth less than $800 from China that previously were shipped to the US duty-free under the de minimis exemption could also be halted.
However, the 25% tariff he has imposed on cars, car parts, steel and aluminum can continue to be levied since those goods are subject to Section 232 of the Trade Expansion Act — a different law from the one currently in contention. Trump could even raise that 25% rate without any issues, said Alex Durante, a senior economist at the Tax Foundation.
In addition to the sectors already subject to higher tariffs, the administration has laid out the groundwork to levy higher tariffs on pharmaceuticals, lumber, copper, semiconductors and critical minerals.
If the appeals process doesn’t go the administration’s way, that could speed up the timeline for enacting those tariffs — and could even lead to new ones getting thrown into the mix.
Most economists — and Trump himself — contend that markedly higher tariffs will increase prices for Americans, since tariffs increase operating expenses for many businesses. There’s less of a consensus, however, as to whether tariffs would result in a one-time price increase or another bout of higher inflation.
So far, the impact of Trump’s tariffs hasn’t shown up in monthly inflation reports. But many economists as well as Federal Reserve officials have predicted an uptick in the inflation rate this year, specifically due to tariffs.
Durante isn’t convinced that the ruling means a whole lot for consumer prices. “It’s just really unclear how this is, how this is going to shake out on that front.”
Clark Packard, a trade policy research fellow at Cato, is more optimistic.
“On prices, this is a big win for American consumers,” he said. “The caveat, though, is how the Trump administration responds.”
His sense, he said, is that any alternative tactics to impose tariffs will come with “more rigid guardrails” compared to the ones Trump has been using. “So, tariffs still may be coming, but they won’t be as swift and as large.”
