By N Srinivasa Reddy & Meera Laetitia B Aranha
August 6, 2025. When President Donald Trump issued Executive Order 14157 and declared a national emergency under the law to target violent drug cartels, the aim sounded urgent and justified. He blamed foreign actors, cartels in Latin America, lax border enforcement in Canada, and chemical suppliers in China for flooding the US with deadly fentanyl and other illicit drugs, along with violent criminals and vicious gangs. In response, his administration imposed sweeping ad valorem tariffs ranging from 10 to 50 percent, not just on targeted industries or nations, but eventually on all imports from nearly every US trading partner. What started as a measure to tackle the drug trafficking cartels and violent gangs soon expanded to all imports across all trading partners.
Several businesses and states filed a case in the United States Court of International Trade called V.O.S. Selections, Inc. v. USA (2025). The three-member court ruled that executive orders from President Trump, which imposed broad tariffs under the International Emergency Economic Powers Act (IEEPA), are invalid. These tariffs affected imports from Canada, Mexico, China, and other trading partners, citing national emergencies about drug trafficking and trade imbalances. Instead of simply issuing a stay, the court took the extraordinary step of releasing a summary judgment. The court’s decision not only cancels these tariffs but also confirms the limits of executive power in trade issues. While this case is with the appeals court, the verdict has significant political and economic effects for the world.
Politically, it has four implications. Firstly, the court found that the executive orders issued by President Trump were effectively usurping legislative powers. The court ruled that national emergency powers do not allow the president to unilaterally change trade policy. This sets a precedent that could constrain future administrations from using emergency powers as a backdoor to implement broad trade policies without congressional approval. Second, the judgment differentiates between legitimate uses of the IEEPA and overreach. IEEPA was created to allow the President to address “unusual and extraordinary threats” to national security, foreign policy, or the economy. The court found that tariffs imposed under the guise of national emergencies, such as drug trafficking and trade deficits, did not meet the necessary legal standards.
Thirdly, this verdict restricts the scope of the IEEPA only to trade matters. It signals to future administrations that national emergencies used to justify broad measures like tariffs must be directly tied to specific trade threats. Finally, the judgment affects US trade relations in both the short and long term. The tariffs didn’t stop drugs, but they disrupted supply chains, undermined goodwill, and made the US an unpredictable trade partner. The tariffs also led to higher costs for US businesses and consumers. Furthermore, retaliatory measures from trading partners led to lower exports. If the tariffs are removed, it may help reduce tensions and create more stable trade flows.
Beyond the political ramifications, the court order exposes a fundamental economic flaw: tariffs are ineffective against criminal enterprises. Drugs are already banned, and traffickers operate outside legal trade channels, and they don’t pay customs duties. Yet, under the guise of a national emergency, the Trump administration imposed sweeping tariffs not just on illicit goods, but on all imports from all trading partners, damaging legitimate commerce. A University of Chicago study found that the 2018 tariffs on washing machines raised washer prices by $86 and dryers by $92, costing consumers over $1.5 billion overall. A team of economists estimated that tariffs from 2018–19 reduced US real income by $7.2 billion (≈ 0.04 % of GDP). A Foreign Affairs analysis projected that 2025 tariffs could reduce US real GDP growth by 0.5–0.9 percentage points (up to –1.1pp if all were enacted), and dent long-run exports by 10–18%. CEPR estimated trade volumes would contract by 5.5–8.5%, with particularly steep losses in automotive (–16%) and electronics (–12%) sectors under a ‘full + retaliation’ scenario. All these numbers indicate the far-reaching impact of tariffs on trade and commerce, and this is just the beginning. Combating drug trafficking requires law enforcement, intelligence cooperation, and bilateral cooperation, not tariffs. The solution is to target criminals, not trade.
The Trump administration’s misuse of national security to justify broad tariffs marked a troubling shift, turning emergency powers into a cover for trade protectionism. This not only undermines democratic norms and global trust in the rule-based international order but also invites similar overreach by other nations, eroding the rules-based trade order. The court’s ruling is a crucial correction, a clear message that tariffs require legal authority and that criminal threats demand law enforcement, not economic punishment of lawful trade. The judgment is under appeal, but the logic of the court is impeccable, with implications for all trading countries.
N Srinivasa Reddy
Chairperson- Placement and Corporate Engagement
Assistant Professor | Marketing
T A Pai Management Institute, Manipal
Meera Laetitia B Aranha
Adjunct Faculty, Prof. of Finance
T A Pai Management Institute, Manipal
