A federal court on Wednesday stopped former President Donald Trump from using emergency powers to impose broad new tariffs, dealing a major setback to one of his key economic policies.

The ruling, issued by a three-judge panel at the U.S. Court of International Trade in New York, said Trump overstepped his authority when he launched what he called “Liberation Day” tariffs. These import taxes were aimed at countries with which the U.S. has trade deficits, and Trump argued they were necessary to protect American jobs and industries.

The judges ruled that Trump’s actions went beyond what the 1977 International Emergency Economic Powers Act (IEEPA) allows. While presidents can take some steps under emergency powers, the court said setting wide-reaching tariffs isn’t one of them.

This decision won’t affect all tariffs. Those imposed under the 1962 Trade Expansion Act — such as Trump’s 25% tax on foreign steel, aluminum, and auto parts — still stand. These tariffs were based on national security concerns after investigations by the Commerce Department.

The court’s decision follows multiple lawsuits from small businesses and states, which argued that the trade deficit isn’t a true emergency — especially since the U.S. has had one for nearly 50 years. Oregon and 11 other states joined the legal challenge, with Oregon Attorney General Dan Rayfield saying, “This ruling reaffirms that our laws matter, and that trade decisions can’t be made on the president’s whim.”

The White House responded by defending the tariffs, calling trade deficits a national crisis and saying it will appeal the decision. A final ruling could end up at the Supreme Court.

Trump had argued the tariffs would bring manufacturing jobs back to the U.S. and reduce federal debt, but critics said they raised prices for consumers and disrupted supply chains.

For now, Trump’s ability to use tariffs as a negotiating tool is limited, unless Congress grants him specific approval — something that may prove difficult in a divided legislature.