A divided three-judge panel at the U.S. Court of International Trade in Manhattan on Thursday ruled that President Donald Trump's 10 percent global tariffs are unlawful, delivering a significant setback to the administration's economic agenda. The decision comes just months after the U.S. Supreme Court vacated earlier levies imposed by Trump.
The panel granted a request by a group of small businesses and two dozen mostly Democrat-led states to invalidate the tariffs, which Trump imposed in February under Section 122 of the Trade Act of 1974. This provision had never been invoked before. The court found that the administration failed to properly identify balance-of-payments deficits, a key criterion for using Section 122, instead relying on trade and current account deficits.
Limited Immediate Impact
The court's ruling currently blocks enforcement of the tariffs only against the two companies that sued and Washington State. The panel declined to issue a universal injunction, stating that the other states lacked standing because they are not direct importers. Instead, those states argued they were harmed by higher prices passed on by businesses.
Jeffrey Schwab, senior counsel for the Liberty Justice Center representing the small businesses, said the next steps depend on the administration's response and whether the Justice Department appeals. A Justice Department spokesperson did not immediately comment.
Reactions from Businesses
Jay Foreman, CEO of Basic Fun Inc., one of the suing companies, praised the decision, noting that his company has paid over US$100,000 in tariffs since the levies took effect. Dan Anthony, leader of the We Pay the Tariffs coalition, called the ruling positive news but said the court should have blocked collection during any appeal.
U.S. customs collected roughly US$8 billion in Section 122 tariffs in March alone, according to government data analyzed by the coalition.
Administration Response
Asked about the ruling, Trump told reporters, "We had two radical left judges who voted against it. So nothing surprises me with the courts." He indicated the administration would pursue alternative approaches.
The court's majority opinion, written by Judges Mark A. Barnett and Claire R. Kelly, rejected the administration's argument that "balance-of-payments deficits" is a malleable phrase. Judge Timothy C. Stanceu dissented.
