Reported by: Oahimire Omone Precious | Edited by: Oravbiere Osayomore Promise.
The United States Court of International Trade delivered a significant legal setback to President Donald Trump’s trade agenda on Thursday, ruling that his 10% global tariff on imports is unlawful. However, in a decision that limits its immediate impact, the court only applied the ruling to two specific companies and the state of Washington.
The 2-1 panel decision found that President Trump was not justified in using a 1970s trade law, Section 122 of the Trade Act of 1974, to impose the across-the-board levy. This marks the second major legal blow to the administration's trade policies in less than three months.
The tariffs, which took effect on February 24, were imposed just hours after the US Supreme Court struck down a previous, more sweeping tariff program that the president had enacted using the 1977 International Emergency Economic Powers Act. Following that 6-3 Supreme Court defeat, which invalidated his “reciprocal” tariffs, Trump pivoted to a different legal justification, Section 122. This rarely invoked law allows a president to enact temporary import surcharges of up to 15% for 150 days to address a serious “balance-of-payments deficit” or to prevent an imminent depreciation of the dollar.
The court found that the administration had failed to meet that legal standard, ruling that a persistent trade deficit is not the same as a balance-of-payments crisis. "The president's tariffs proclamation 'is invalid, and the tariffs imposed on Plaintiffs are unauthorized by law,'" the judges wrote in the majority opinion.
“But no such thing exists,” Oregon Attorney General Dan Rayfield’s office said in a release, responding to the administration’s claim of a balance-of-payments crisis. In his February order, Trump argued the US faced a "large and serious" deficit, pointing to a $1.2 trillion annual goods trade deficit.
The ruling is a victory for the plaintiffs who brought the suit: Basic Fun!, a Florida toy manufacturer, Burlap & Barrel, a New York spice importer, and the state of Washington. The U.S. Court of International Trade concluded these entities had legal “standing” because as direct importers they had suffered concrete injury by paying the new tax. The ruling blocks the tariffs specifically for these two companies and Washington state.
A massive 24-state coalition led by Democratic attorneys general, including New York’s Letitia James, also sued to block the tariffs but were mostly dismissed due to a lack of standing. The court found it could not issue a nationwide injunction because the other states did not prove they were direct importers of the taxed goods.
The Trump administration is widely expected to appeal the ruling, and the tariffs will remain in place for all other importers while the government files its appeal.
“This decision is an important win for American companies that rely on global manufacturing to deliver safe and affordable products. Unlawful tariffs make it harder for businesses like ours to compete and grow,” said Jay Foreman, CEO of Basic Fun!.
The Biden administration is currently pursuing its own tariffs against China, which are not affected by this ruling, as they were implemented under Section 301.
The ruling has been watched closely by US trading partners, including India, where experts have cautioned that the uncertainty could complicate the launch of a Bilateral Trade Agreement. The WTO has also previously warned that such “tit-for-tat” protectionism could shrink global trade volumes this year.
Upon the Supreme Court’s February ruling against his earlier tariffs, Trump blasted the court, saying, “I’m ashamed of certain members of the court – absolutely ashamed – for not having the courage to do what’s right for our country”. The White House did not immediately respond to a request for comment on Thursday’s new ruling.
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