A US court has put a temporary stay on an earlier ruling that Donald Trump's "liberation day" tariffs were illegal.
The ruling looked set to derail the president's attempts to reorder global trade.
Wall Street posted gains on Thursday after the levies were overturned, and the case looks "likely" to end up before the US Supreme Court.
The lawsuit was filed by a group of small businesses, including wine wholesaler VOS Selections, whose owner has said the tariffs could torpedo the company.
Lawyers for the plaintiffs argued Donald Trump lacked legal authority to impose sweeping tariffs on America's trading partners.
Here's what could happen next and what it could mean for Australia.
What happened at court?
The US president unveiled his sweeping tariff plan at the White House in early April, imposing so-called "reciprocal" levies of up to 50 per cent on some of America's biggest trading partners.
Most other countries — including Australia — were subjected to a "baseline" tariff of 10 per cent, which Prime Minister Anthony Albanese slammed as "unfriendly".
After suspending most of the reciprocal tariffs, the Trump administration had settled on a 10 per cent "baseline" tariffs on all imports into the US, with a higher rate levied against China.
On Wednesday, three US federal trade court judges blocked the plan.
Trump had overstepped his authority, they ruled, when he invoked a 1977 act — the International Emergency Economic Powers Act — to declare a national emergency and justify the tariffs.
US expert at think tank Chatham House, Max Yoeli, said the court's decision puts a pause on these tariffs, but not other levies that were in place before Donald Trump's 'liberation day' announcement.
"Even though it is not a complete step back from the US tariff posture, it does provide a little bit of breathing room for trading partners around the world as they try to decide how to move forward facing the threat from the United States," Mr Yoeli told ABC's The World program.
What does it mean for Trump?
Following the US International Trade Court's ruling, an appeals court promptly reinstated the tariffs during the appeals process.
But the initial ruling raises questions about whether the central plank of Trump's second term can ever be enacted by the president alone.
Many of America's trading partners, as well as many US citizens, who opposed levies will be relieved.
It has been widely reported the tariffs raised the risk of higher prices for US consumers and a recession, both in the US and around the world.
Former US trade official Wendy Cutler, who is now vice president at the Asia Society Policy Institute, tells AP the court's decision "throws the president's trade policy into turmoil."
"Partners negotiating hard during the 90-day day tariff pause period may be tempted to hold off making further concessions to the US until there is more legal clarity," she said.
It is also expected that companies will have to reassess their supply chains, perhaps speeding up shipments to the United States to offset the risk that the tariffs will be reinstated on appeal.
What will happen next?
The US Court of International Trade's civil ruling will be considered by the US Court of Appeals, and failing success there, ultimately to the Supreme Court.
Of the nine Supreme Court justices, six were appointed under Republican presidents and are considered conservative-leaning.
Mr Yoeli said the case was "likely" to end up before the Supreme Court.
"We've certainly not heard the last of it yet," he said.
"This could very well drag on beyond the midterm elections, perhaps even leading up to the presidential election in 2028."
In the meantime, countries hoping to strike a trade deal with the US may be inclined to hold off.
Before the appeals court decision, White House economic adviser Kevin Hassett expressed confidence that the ruling would ultimately be reversed in an interview with Fox Business on Thursday. He also said it would not get in the way of signing new trade deals.
"If there are little hiccups here or there because of decisions that activist judges make, then it shouldn't just concern you at all, and it's certainly not going to affect the negotiations," he said.
Can he get around the ruling?
In a statement after the decision, the White House said it is "not for unelected judges to decide how to properly address a national emergency".
It remains unclear is whether the White House will respond to the ruling by pausing all of its emergency power tariffs in the interim.
Trump might still be able to temporarily launch import taxes of 15 per cent for 150 days on nations with which the US runs a substantial trade deficit.
The ruling notes that a president has this authority under Section 122 of the Trade Act of 1974.
What will it mean for tariffs on Australian goods?
Depending on whether the Trump administration executes the tariffs, the move could result in the 10 per cent tariff on Australian exports to the US being suspended.
But it is noteworthy that the available legal option for Trump of 15 per cent tariffs on countries that run a substantial trade deficit with the US may not apply to Australia.
According to the US Bureau of Industry and Security, the US has had a trade surplus with Australia in recent years.
And while the US is not a major destination for Australian exports, an American trade war with our major trading partners — namely China — could still be felt at home.
ABC/AP/Reuters
