Courts are striking down Trump's tariffs, but prices in the US aren't falling: why

A federal court dealt another blow to President Donald Trump's trade policies by ruling illegal the 10% tariff he imposed to replace the taxes previously struck down by the Supreme Court. However, consumer prices are still unlikely to decline as long as the war with Iran continues. Nevertheless, the administration is exploring other ways to impose tariffs, writes USA Today.

On May 7, the Court of International Trade ruled by a 2-1 majority that Trump's February decision to invoke Section 122 of the 1974 Trade Act to impose a 10 percent tariff was unlawful. While the two justices in the majority barred the administration from imposing these tariffs in Washington state and against two companies that also challenged the policy, the tariffs will remain in place for most importers until the appeals process is resolved.

US Trade Representative Jamison Greer confirmed on May 8 that the administration intends to appeal the decision and expects success.

On the subject: Trump's importer duty refund system is now live: How applications are being accepted and payments are being processed

"President Trump is focused on using tariffs to protect our economy," Greer said on Fox Business Network's "Mornings with Maria." "We'll certainly follow the law and do what the courts order, but his policies won't change."

Boston College economics professor Brian Bethune believes the appeal's chances of success are slim.

"They already tried this with the IEEPA tariffs. It didn't work," he noted, referring to previous tariffs imposed under the International Emergency Economic Powers Act. "In this case, the likelihood of success is extremely low because the conditions for Section 122 are completely violated."

Why the tariff story isn't over

In any case, the administration still has several other options for imposing tariffs—a key element of Trump's economic policy. One option is to invoke Section 301 of the same 1974 law, which requires investigations but allows tariffs to be imposed in response to actions by foreign governments that harm or restrict U.S. trade. Greer previously announced Section 301 investigations against several countries and the European Union.

Once the appeals process and investigations are complete, it's unclear whether the actual tariff level will be lower, higher, or comparable to last year's level, after Trump imposed tariffs on nearly all US trading partners under the International Emergency Economic Powers Act. In February, the Supreme Court ruled those tariffs unlawful.

Drew DeLong, head of government affairs at Kearney Foresight, the in-house think tank of global consulting firm Kearney, said that if the Section 301 investigations proceed as the administration hopes, the actual tariff level by the end of this year will be close to or higher than the level seen in late 2025.

Why a court ruling against tariffs doesn't necessarily mean lower prices

For importers who paid duties under the IEEPA, the court's decision to cancel them means refunds, and such payments are expected to begin this month. However, this does not guarantee price reductions, even if importers receive compensation.

"Time will tell, but I think businesses are wary of the ever-changing tariff landscape and will proceed with caution," Matthew Seligman, a lawyer and founder of Grayhawk Law, told USA TODAY.

While tariffs have increased inflation beyond what it would otherwise be, they are not the only factor driving up prices, said John Groton, who oversees the energy, materials and utilities sectors at Thrivent.

Oil price shocks caused by the war with Iran have already hit American drivers with higher gasoline prices. However, according to Groton, if the conflict drags on, disruptions in the supply chains for fertilizers, metals, and freight could make food, housing, and other goods even more expensive for consumers.

"Gasoline gets the most attention. The price increase there is immediate. Unless you have an electric car or buy gas once a week, it's very noticeable," Groton noted. "In other areas, the effect is gradual."

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Meanwhile, preliminary results from the University of Michigan's May 8 consumer survey showed the consumer sentiment index fell to 48,2, a new record low.

"About a third of consumers mentioned gasoline prices, and about 30% mentioned tariffs," said Joan Hsu, director of the survey program. "Overall, consumers continue to feel pressure from rising costs, primarily due to the sharp rise in gasoline prices."

Inflation appears to have risen again in April. The Labor Department's Consumer Price Index report, scheduled for release on May 12, will confirm whether these forecasts hold true.

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