10% Tariff in Court

Three judges in a Manhattan trade court spent more than three hours on April 10 asking whether President Donald Trump can keep a 10% tax on nearly all imports by calling the U.S. trade gap an emergency under a 1974 law. The hearing ended without a ruling, so the tariff that took effect on February 24 is still in place for now. (reuters.com) (bloomberg.com) The fight is over Section 122 of the Trade Act of 1974, a law that lets a president impose duties of up to 15% for up to 150 days when the United States faces “large and serious” balance-of-payments deficits or an imminent dollar crisis. Reuters reported that no president had used Section 122 for tariffs before Trump did. (reuters.com) (ustr.gov) A tariff is just a tax at the border, and companies usually pay it before the cost gets pushed into prices, margins, or supplier contracts. A 10% tariff on a $100 imported part turns that part into a $110 part before it ever reaches a factory or store shelf. (reuters.com) Trump got here after losing a bigger tariff case on February 20. The Supreme Court struck down many of his earlier tariffs under the International Emergency Economic Powers Act, a 1977 emergency law, after finding that statute did not clearly give the president power to impose tariffs. (reuters.com) (congress.gov) Hours after that Supreme Court loss, Trump switched legal tracks and used Section 122 instead. The United States Trade Representative lists a February 20, 2026 presidential proclamation for a “temporary import surcharge” under Section 122, and Reuters said the new 10% tariff began on February 24. (ustr.gov) (reuters.com) The plaintiffs are 24 mostly Democratic-led states and two small businesses, and their argument is narrow but sharp: a normal trade deficit is not the same thing as a balance-of-payments deficit. In plain English, they say Congress wrote Section 122 for short-term currency stress, not for a standing complaint that America buys more goods than it sells. (reuters.com) (bloomberg.com) That old phrase matters because “balance of payments” came from an era when governments were more tightly managing exchange rates. Bloomberg reported that the challengers told judges the concept made more sense in the fixed-rate world around the gold standard, which is why they say Trump is stretching an old tool into something much bigger than Congress intended. (bloomberg.com) (congress.gov) The administration’s answer is that the U.S. trade deficit is persistent, large, and damaging enough to justify action without waiting for Congress. Reuters said the government defended the tariff as a legal response to the fact that the United States imports more goods than it exports. (reuters.com) There is another clock running in the background: Section 122 caps this kind of tariff at 150 days unless Congress steps in. Bloomberg reported that Trump has said he wants to raise the levy to 15%, which makes the court fight less academic for importers trying to price inventory months ahead. (bloomberg.com) (reuters.com) This case is also tied to a much larger money fight from the earlier tariffs. Bloomberg reported that businesses are already battling over as much as $170 billion in possible refunds from the tariffs the Supreme Court knocked out, so another loss for the administration could widen the legal and accounting mess. (bloomberg.com) If the judges say Section 122 covers a broad global tariff tied to the trade gap, presidents will have a faster route to import taxes than many trade lawyers thought existed. If the judges reject that reading, Trump keeps the steel, aluminum, and copper tariffs that rest on other statutes, but this 10% across-the-board tariff becomes much harder to keep alive. (reuters.com) (whitehouse.gov)