THE legal fight over President Donald J. Trump’s global tariffs is deepening after a federal appeals court ruled the levies were issued illegally under an emergency law, extending the chaos in global trade.

A 7-4 decision by a panel of judges Friday night in Washington was a major setback for Mr. Trump even as it gives both sides something to boast about.

The majority upheld a May ruling by the Court of International Trade that the tariffs were illegal. But the judges left the levies intact while the case proceeds, as Mr. Trump had requested, and suggested that any injunction could potentially be narrowed to apply only to those who sued.

It’s unclear exactly where the case goes from here. The Trump administration could quickly appeal the ruling to the Supreme Court, or it could allow the trade court to revisit the matter and potentially narrow the injunction against his tariffs.

“Our trading partners must be dazed and confused,” Wendy Cutler, a senior vice-president at the Asia Society Policy Institute and veteran US trade negotiator, wrote in a post on LinkedIn. “Many of them entered into framework deals with us and some are still negotiating.”

Trillions of dollars of global trade are embroiled in the case, which was filed by Democratic-led states and a group of small businesses. A final ruling against Mr. Trump’s tariffs would upend his trade deals and force the government to contend with demands for hundreds of billions of dollars in refunds on levies already paid.

“It’s very gratifying,” said Elana Ruffman, whose family-owned toy businesses Learning Resources, Inc. won a separate lawsuit over Mr. Trump’s tariffs issued under the International Emergency Economic Powers Act, or IEEPA. “It’s great that the court agrees with us that the way these tariffs are implemented is not legal.”

Mollie Sitkowski, a trade lawyer at Faegre Drinker Biddle & Reath LLP, pointed out in a note to clients on Friday that the ruling “does not directly apply” to tariffs on Brazil or India that were issued under the emergency law and may not address the separate removal of the “de minimis” exception for packages valued under $800.

Friday’s ruling by the US Court of Appeals for the Federal Circuit held that Mr. Trump was wrong to issue tariffs under IEEPA, a federal law that the panel concluded was never intended to be used in such a manner. Indeed, the court noted that the law doesn’t mention tariffs “or any of its synonyms.”

“Once again, a court has ruled that the President cannot invent a fake economic emergency to justify billions of dollars in tariffs,” New York Attorney General Letitia James, who is a party to the tariff lawsuit, said in a statement. “These tariffs are a tax on Americans — they raise costs for working families and businesses throughout our country, causing more inflation and job losses.”

The ruling applies to Mr. Trump’s “Liberation Day” global tariffs that set a 10% baseline and have been in effect for months that the administration says are meant to address a national emergency around US trade deficits. It affects the extra levies on Mexico, China and Canada that Mr. Trump said were justified by the ongoing fentanyl crisis in the US, which he also said was a national emergency under IEEPA.

The decision also covers Mr. Trump’s so-called reciprocal tariffs that took effect Aug. 7 for dozens of nations that failed to reach trade deals with the administration by Aug. 1. Various carve-outs and extensions have been announced since then, leaving the final tariffs for some nations up in the air.

Mr. Trump’s tariffs were first ruled illegal in May by the US trade court in Manhattan. That decision was put on hold by the Federal Circuit for the appeal, allowing the administration to continue threatening tariffs during the negotiations.

Hours before Friday’s ruling dropped, Mr. Trump’s cabinet officials told the appeals court that a striking down the President’s tariffs would seriously harm US foreign policy, with Treasury Secretary Scott Bessent saying it would lead to “dangerous diplomatic embarrassment” and undermine trade talks. On Friday night after the court move, Mr. Trump posted on X that if the tariffs went away, “it would be a total disaster for the Country.”

Ms. Cutler, who spent nearly three decades as a diplomat and negotiator at the Office of the US Trade Representative, suggested that the administration’s concerns about trade deals may now be a reality. She wrote in her post that India, hit by a 50% tariff, “must be rejoicing,” while China “must be weighing its stance in making concessions in ongoing talks.”

“EU (European Union) efforts to secure domestic approval of its deal may be called into question, while Japan and Korea whom apparently have made oral deals with little in writing may choose to slow walk current efforts until there is more US legal clarity, while still pressing for lower auto tariffs,” Ms. Cutler said. — Bloomberg

President Prabowo Subianto moved to quell widespread protests across Indonesia with parliament removing hefty lawmaker allowances that had sparked public outrage, while warning that firm action will be taken against violent demonstrators.

The government will listen and act on people’s concerns, Prabowo said in a televised briefing from the presidential palace on Sunday, flanked by political party leaders. Parliament will also place a moratorium on overseas visits by lawmakers, while parties will take firm action against their erring members, he said.

Protests over rising living costs and inequality intensified over the weekend, with government buildings being burned and looters reportedly targeting the homes of the finance minister and several lawmakers. Prabowo on Saturday scrapped a trip to China to attend a major security summit, underlining growing concern about the protests that have rocked the nation in the past week and hurt stocks and the rupiah. 

The protests were sparked by outrage over lawmakers’ housing allowances— nearly 10 times the monthly minimum wage — and fueled by tax hikes, mass layoffs, and inflation that have disproportionately hit lower-income Indonesians. The death of a motorcycle taxi driver, Affan Kurniawan, who was run over by a police vehicle during a rally, further inflamed tensions.

“I call on all citizens to trust the government and remain calm,” Prabowo said. “The government under my leadership is determined to always fight for the people’s interests, including those of the most vulnerable and marginalized.”

Rioters entered Finance Minister Sri Mulyani Indrawati’s residence near Jakarta early Sunday, but were repelled by armed forces personnel. Items were taken from the homes of lawmaker Ahmad Sahroni and two others, according to Detik.com. The finance ministry did not responded to requests for comment.

Embassies in Jakarta, including those of the US, Japan, Australia and Singapore, earlier issued warnings for their citizens in Indonesia to avoid crowds and protest areas. 

A police spokesperson on Sunday said any anarchic acts would face “decisive but measured” action under standard procedures, calling it a last resort the force hopes to avoid. Jakarta Police will deploy over 300 personnel to patrol the city, he said.

The situation is “indeed very concerning,” said Rajeev De Mello, global macro portfolio manager at Gama Asset Management. “We expect this to translate into heightened volatility for the rupiah and broader Indonesian assets, as markets reassess both political risk and policy continuity.”

Even before Prabowo’s announcement on Sunday, Indonesia’s Democratic Party of Struggle and Gerindra issued separate statements over the weekend pledging to scrap or review a controversial monthly housing allowance of 50 million rupiah ($3,030) along with other perks deemed excessive.

“A worsening economy, spending cuts, corruption – no one believes that anything good is being done to fix those issues and the feeling is Parliament has lost touch with the people,” said Vedi Hadiz, director of the Asia Institute at the University of Melbourne. “These are the organic grievances of the people.”

EMPTY SHOWROOMS
While calm prevailed in Jakarta’s Chinatown — a historic flashpoint for unrest that fueled the 1998 riots and led to the fall of former President Suharto — businesses took precautions. Armored personnel carriers were stationed outside major shopping centers, and a nearby BMW showroom, ransacked during the 1998 violence, pulled its cars from display. In downtown Jakarta, a Toyota showroom also removed vehicles from public view.

Police also blocked road access to the Sudirman Central Business District, the location of the Indonesian Stock Exchange building and headquarters of several international banks. 

Protests in major cities have turned deadly, with at least three people killed in Makassar and dozens of buildings and public facilities destroyed, despite the president’s earlier plea for calm. In response to the escalating violence, TikTok announced it has “voluntarily” suspended its Live feature.

While citizens have the right to expression and assembly, “demonstrations currently taking place in several regions tend to violate” the law, National Police chief Listyo Sigit Prabowo said on television on Saturday, speaking alongside Indonesian military commander Agus Subiyanto. He cited the burning of buildings and public facilities and the attacks on police headquarters.

Indonesia’s equity benchmark has retreated from a record and was the world’s worst-performing primary index on Friday after it dropped 1.5%. — Bloomberg