The U.S. Court of International Trade has delivered a significant legal blow to former President Donald Trump's trade policies, ruling that his temporary 10% global tariffs are “unauthorised by law” and “invalid.” The split three-judge panel found that Trump had exceeded the tariff authority granted to the president by Congress under Section 122 of the Trade Act of 1974.
This decision marks another setback for Trump's tariff strategy, coming months after the U.S. Supreme Court struck down broader duties he had imposed under a national emergencies law. Following that Supreme Court ruling, Trump had pivoted to Section 122, which permits duties of up to 15% for a maximum of 150 days to address serious balance-of-payments deficits or prevent an imminent depreciation of the dollar.
The court, based in New York, concluded that Section 122 was not the appropriate legal basis for the trade deficits cited in Trump's original February order. The administration had argued for the existence of a serious balance-of-payments deficit, pointing to a $1.2 trillion annual U.S. goods trade deficit and a current account deficit equivalent to 4% of GDP. However, economists, including former IMF First Deputy Managing Director Gita Gopinath, had previously questioned this premise, stating the U.S. was not facing a balance-of-payments crisis.
Crucially, the 2-1 ruling did not issue a universal injunction that would have blocked the tariffs for all importers. Instead, it specifically blocked the levies only for the three plaintiffs involved in the case: the state of Washington, toy company Basic Fun!, and spice importer Burlap & Barrel. The court rejected requests from 24 states for a universal injunction, citing a lack of standing for most, as they were not direct importers who had paid the Section 122 tariffs. Washington state, however, provided evidence that tariffs had been paid through the University of Washington.
Jay Foreman, CEO of Basic Fun!, welcomed the ruling, stating, “We fought back today, and we won, and we’re extremely excited.” He emphasized the decision's importance for American companies relying on global manufacturing to deliver affordable products, noting that “unlawful tariffs make it harder for businesses like ours to compete and grow.” Jeffrey Schwab, director of litigation at Liberty Justice Centre, which represented the two companies, acknowledged that the limited scope of the ruling raised questions about its broader implications and whether other companies might file similar lawsuits.
The tariffs are currently scheduled to expire on July 24. Former President Trump, reacting to the decision, blamed “two radical left judges,” stating, “So, nothing surprises me with the courts. Nothing surprises me. We get one ruling and we do it a different way.”