President Donald Trump is facing what one Nobel Prize-winning economist calls a “self-inflicted disaster” on the economy.
On Friday, a federal appeals court ruled that most of Trump’s tariffs were imposed unlawfully, upholding an earlier decision by the Court of International Trade.
The ruling does not ban tariffs altogether but found that Trump’s use of the 1977 International Emergency Economic Powers Act (IEEPA) to declare an “economic emergency” and set tariff rates without Congress’s approval broke the law.
Paul Krugman, who won the Nobel Prize in Economic Sciences in 2008, said the issue was Trump’s own doing. “He probably could have gotten Republicans in Congress to vote for insane trade policy. But he was impatient, and wanted to start ruling as a dictator right away,” Krugman wrote in a blog post.
Why It Matters
The decision creates new challenges for Trump’s goal of reshaping U.S. trade policy. He still has legal options under the 1974 Trade Act, but those powers are more limited and slower to use. Trump’s tariff strategy—rolled out unpredictably—has shaken global markets, strained relations with U.S. allies, and sparked fears of higher prices and slower growth.
At the same time, tariffs remain central to his approach. He has used them to pressure the European Union, Japan, and others into trade deals he considers favorable. Trump has also argued that tariffs have sent tens of billions of dollars into the U.S. Treasury, helping to balance the cost of the tax cuts he signed into law on July 4.
What To Know
Krugman said Trump undermined his own case by declaring an “economic emergency” while repeatedly insisting that the economy was strong.
After the ruling, Trump posted on Truth Social that “ALL TARIFFS ARE STILL IN EFFECT!” and warned that removing them would be a “total disaster for the Country.”
Krugman mocked the claim, pointing out that economic conditions were stable when tariffs were first imposed on April 1.
The U.S. economy dipped slightly in early 2025, with GDP falling between 0.3 and 0.5 percent, according to McKinsey & Company and the Bureau of Economic Analysis. That came after 2.4 percent growth at the end of 2024. By April through June, however, the economy bounced back, growing at a 3.3 percent annual rate.
If the tariffs are ultimately overturned, the government might have to refund billions in collected import taxes—a major hit to federal revenue. Tariff revenue had already reached $142 billion by July, more than twice last year’s total at the same point. The Justice Department has argued that removing the levies could lead to “financial ruin” for the United States.
Trump has signaled he will appeal to the Supreme Court. “Now, with the help of the United States Supreme Court, we will use them to the benefit of our Nation, and Make America Rich, Strong, and Powerful Again!” he wrote on Truth Social.
Krugman warned that the Supreme Court could side with Trump but said there’s a chance it might set limits. “The Supreme Court is utterly craven, and may well rule that Trump gets to do whatever he wants. But maybe even they will balk,” he wrote.
What People Are Saying
Krugman argued that simply declaring “I am the Tariff Man, and here are my tariffs” is not legal. He noted that the IEEPA allows tariffs in a real emergency, but Trump has often said the economy is “booming” and doing well, which contradicts his legal justification.
Jeffrey Schwab, director of litigation at the Liberty Justice Center, said the ruling shows Trump does not have unlimited power to impose tariffs: “This decision protects American businesses and consumers from the uncertainty and harm caused by these unlawful tariffs.”
In another Truth Social post, Trump insisted the United States “will no longer tolerate enormous Trade Deficits and unfair Tariffs and Non Tariff Trade Barriers imposed by other Countries.” He added that tariffs are the best way to protect American workers and manufacturers.
What Happens Next
The ruling will not take effect until October 14, as the Trump administration is expected to appeal to the Supreme Court.
