Trade Court Rules Trump’s Replacement Tariffs Illegal

A federal court on Thursday ruled that President Donald Trump unlawfully used Section 122 of the Trade Act of 1974 to impose a 10 percent global tariff — a backup plan the president implemented after the Supreme Court struck down his more sweeping worldwide tariffs earlier this year.

A divided three-judge panel on the U.S. Court of International Trade concluded that Trump’s Plan B was similarly unlawful. And the two judges in the majority barred the administration from collecting the duties from Washington state and two companies that sued over the policy.

The court did not issue nationwide relief for the hundreds of thousands of importers that have paid or continue to pay the tariffs, but it has set a precedent that other companies could point to in any legal effort to pursue similar relief.

While 24 Democratic-led states, spice importer Burlap and Barrel and toy company Basic Fun challenged the policy, the panel found that only Washington and the two companies had standing, leaving the injunction limited to those plaintiffs.

Trump’s February proclamation imposing the new tariffs “is invalid, and the tariffs imposed on Plaintiffs are unauthorized by law,” Judges Mark Barnett and Claire Kelly, both Obama appointees, wrote for the panel’s majority. Judge Timothy Stanceu, a George W. Bush appointee, dissented.

Section 122 allows a president to impose temporary import surcharges of up to 15 percent for no more than 150 days when the United States faces “fundamental international payments problems,” including “large and serious United States balance-of-payments deficits.”

Trump’s attempt to use that statute for the replacement tariffs was legally controversial from the outset. Democratic-led states, businesses and trade lawyers argued the Nixon-era law had never been used for broad modern tariff policy and was instead intended for narrow balance-of-payments and currency emergencies. During oral arguments last month, the three-judge panel openly questioned whether the statute could legally justify Trump’s tariff program at all.

The Trump administration is still seeking to restore the remainder of his tariff regime using alternative authorities. In March, the Office of the U.S. Trade Representative launched investigations into dozens of countries under a separate authority — Section 301 of the Trade Act of 1974 — which is widely expected to lead to sweeping tariffs this summer.

Jeffrey Schwab, senior counsel and director of litigation at the Liberty Justice Center, which represents Burlap and Barrel and Basic Fun, celebrated the decision in a statement, reiterating Section 122 is not designed to address long-running trade deficits.

“Congress authorized the President to impose tariffs where the United States experienced fundamental international payments problems and needed to respond to large and serious balance-of-payments deficits,” Schwab said. “That is not the situation here.”

Kyle Cheney contributed to this report.