A US trade court has ruled that former President Donald Trump did not have the legal authority to impose temporary 10% global tariffs, delivering another major setback to the administration’s trade policy. The ruling has increased pressure on Trump’s tariff strategy as the administration now prepares to challenge the decision through an appeal.

The judgment came from a split three-judge panel of the Court of International Trade in New York. In a 2-1 decision, the court ruled that the tariffs were illegal and said Trump had gone beyond the powers granted to the president by Congress under US law. The majority described the tariffs as “invalid” and “unauthorised by law.”

However, one judge on the panel disagreed with the majority opinion. The dissenting judge argued that the law provided the president with broader authority on tariff-related matters.

The case focused on temporary 10% worldwide tariffs imposed by the Trump administration after the Supreme Court of the United States struck down broader double-digit tariffs earlier this year. Those earlier tariffs had been imposed on nearly every country. Following that setback, the administration used Section 122 of the Trade Act of 1974 to introduce the new temporary tariffs. These tariffs were due to expire on July 24.

The legal challenge was brought forward by small businesses that argued the tariffs were unlawful and harmful to their operations. The ruling directly stopped tariff collection from three plaintiffs involved in the case. These included the state of Washington, spice company Burlap and Barrel, and toy company Basic Fun.

Jeffrey Schwab, director of litigation at the Liberty Justice Centre, which represented the two companies, said it was still uncertain whether businesses outside the case would continue to pay the tariffs while the legal battle continues.

“We fought back today, and we won, and we’re extremely excited,” Basic Fun! CEO Jay Foreman told reporters after the ruling.

The decision marks another legal blow to the Trump administration’s efforts to defend its tariff policies. Last year, Trump relied on the International Emergency Economic Powers Act of 1977, commonly known as IEEPA, to justify imposing sweeping global tariffs. The administration argued that the long-running US trade deficit qualified as a national emergency.

However, on February 28, the Supreme Court ruled that IEEPA did not authorise the president to impose those tariffs. The court reaffirmed that the US Constitution grants  Congress the power to establish taxes and tariffs, although lawmakers can hand over limited tariff powers to the president under specific laws.

Trade lawyer Dave Townsend said the latest court ruling may encourage more companies to challenge the tariffs and seek refunds. According to Townsend, “Other importers likely will now ask for a broader remedy that applies to more companies,” though he also warned that the case could eventually return to the Supreme Court.

The Trump administration is expected to appeal the ruling issued on Thursday. The appeal process will first move to the US Court of Appeals for the Federal Circuit in Washington. The dispute could later be taken back to the Supreme Court if required.

Even as the legal fight continues, the administration is exploring other ways to enforce trade restrictions. The Office of the US Trade Representative is currently examining whether 16 trading partners, including China, the European Union and Japan, are overproducing goods in ways that hurt American manufacturers by pushing prices lower.

At the same time, the office is also investigating whether 60 economies are doing enough to prevent the trade of goods linked to forced labour. The countries under review range from Nigeria to Norway and together account for 99% of US imports.

The latest court ruling has added further uncertainty around the future of Trump-era tariffs. It also raises fresh questions about the limits of presidential authority on trade matters and the role of Congress in shaping US tariff policy.