Court tests 10% tariffs

A three-judge trade court spent April 10 asking a basic question the government struggled to answer: what exactly counts as a “fundamental international payments problem” serious enough to justify a 10% tax on imports from nearly every country. The tariff took effect on February 24 under Section 122 of the Trade Act of 1974, a law presidents have almost never used this way. (politico.com) (federalregister.gov) The courtroom fight exists because the Supreme Court blew up the administration’s earlier tariff strategy on February 20. In Learning Resources v. Trump, the justices ruled 6-3 that the International Emergency Economic Powers Act does not let a president create tariffs on his own. (supremecourt.gov) (congress.gov) Hours after that ruling, the White House switched legal tracks instead of dropping the import taxes. President Trump announced a temporary global surcharge under Section 122, and that statute caps the rate at 15% and the duration at 150 days unless Congress extends it. (whitehouse.gov) (federalregister.gov) That legal switch is why the judges kept circling one phrase. Section 122 is written for balance-of-payments trouble, which is closer to a country struggling to pay its foreign bills than simply buying more goods than it sells in trade. (axios.com) (federalregister.gov) The challengers are 24 mostly Democratic-led states and two small businesses, and they say the administration is treating a trade deficit like a blank check. Reuters reported that judges openly questioned whether a large trade deficit by itself is enough to support broad tariffs on almost all imports. (reuters.com) (pbs.org) This is not just a law-school argument because importers are already dealing with two tariff worlds at once. The old duties were struck down, but the replacement 10% tariff is still being litigated, so companies have to price goods while one set of charges is headed toward refunds and another set could vanish later. (spglobal.com) (politico.com) The refund side is huge. U.S. Customs and Border Protection says it is building a system called Consolidated Administration and Processing of Entries inside the Automated Commercial Environment to process valid refund requests for duties collected under the old emergency-powers tariffs. (cbp.gov) Customs said on April 10 that phase one of that refund process will begin on April 20, 2026. The first wave covers certain entries that are still open or were finalized within the last 80 days, which means many importers will still be waiting even after the portal starts. (cbp.gov) (thompsonhinesmartrade.com) Trade lawyers say the refund pool is around $165 billion spread across more than 53 million import entries and roughly 330,000 importers. That is why cash flow matters here: a company that paid millions in duties can be legally owed the money back and still wait months while the system catches up. (skadden.com) (spglobal.com) So the case now turns on a narrow but expensive question. If the Court of International Trade decides Section 122 does not cover a broad 10% tariff tied mainly to the trade gap, the administration could lose the replacement policy that kept tariffs alive after the Supreme Court shut down the first one. (cit.uscourts.gov) (reuters.com)