President Donald Trump is facing a lawsuit over the 20% tariffs imposed on Chinese goods. This marks the first known legal challenge against these tariffs.
What Happened: The lawsuit, filed on Thursday, challenges Trump’s use of the International Emergency Economic Powers Act of 1977, reported The Hill. It argues that while the IEEPA allows for asset freezes and economic sanctions, it does not authorize tariffs. The lawsuit claims, “Congress passed the IEEPA to counter external emergencies, not to grant presidents a blank check to write domestic economic policy.”
The New Civil Liberties Alliance filed the lawsuit on behalf of Simplified, a Florida-based small business that sells planners and sources products from China. The suit, filed in federal court in Pensacola, Florida, seeks a judicial declaration that the tariffs are unlawful and requests their enforcement be halted.
Initially, Trump imposed a 10% tariff on Chinese goods via an executive order on February 1, which was doubled to 20% on March 3. This was followed by a broader announcement introducing a 10% general tariff on U.S. imports and higher rates for several countries, including an additional 34% tariff on China, culminating in a total of 54%.
Why It Matters: The tariffs have sparked significant concern among economists and market analysts. According to Ed Yardeni, president of Yardeni Research, the sweeping tariffs could lead the U.S. economy toward stagflation, a scenario characterized by stagnant growth and rising inflation.
This sentiment was echoed by Larry Summers, former Treasury Secretary, who compared the tariffs’ impact to an “oil crisis-like shock,” potentially slashing $30 trillion from the economy.
Additionally, the tariffs have heightened the risk of retaliatory measures from major trading partners. Speculators have already begun pricing in the likelihood of increased retaliatory tariffs, as noted by recent trading activity on the CFTC-regulated prediction platform Kalshi.
U.S. stocks tumbled after the tariffs were announced, with the Dow Jones Industrial Average dropping 4% to close at 40,545.93 on Thursday. The S&P 500 slid 5% to 5,396.52, while the tech-heavy Nasdaq suffered the steepest losses, plunging nearly 6% to 16,550.61.
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