Trade Court Hears Tariff Fight
A U.S. trade court heard arguments over the administration’s 10% global tariff, leaving firms uncertain about whether the measure has a durable legal basis. Plaintiffs — including small businesses and 24 mostly Democratic‑led states — argue the law used is inappropriate, and judges questioned whether a large trade deficit alone justifies the levy (reuters.com) (bloomberg.com).
Three judges in New York spent Friday asking a basic question with trillion-dollar consequences: can a president put a 10% tax on nearly everything the country imports by using a law that was written for short-term monetary emergencies. The hearing was in the United States Court of International Trade, the specialized federal court that handles customs and trade fights. (reuters.com) (cit.uscourts.gov) The tariff at issue is the administration’s February 24 order imposing a 10% duty on imports, and the challengers are two small businesses plus 24 mostly Democratic-led states. They asked the court to wipe it out immediately, arguing the White House switched legal theories after the Supreme Court blocked an earlier, broader tariff program in February 2026. (reuters.com) (congress.gov) (bloomberg.com) This time the administration is relying on Section 122 of the Trade Act of 1974, not the International Emergency Economic Powers Act of 1977. Section 122 was designed for balance-of-payments problems and lets a president impose temporary import surcharges of up to 15% for up to 150 days. (pbs.org) (congress.gov) A balance-of-payments problem is not the same thing as “the United States buys more goods than it sells.” It is a narrower idea about pressure on a country’s international accounts and currency position, which is why judges pressed government lawyers on whether a large goods trade deficit, by itself, fits the statute. (axios.com) (reuters.com) The challengers’ argument is that Section 122 is an old tool built for the Nixon-era collapse of the gold-standard system, not a standing license to tax global trade whenever a president dislikes the trade gap. Bloomberg reported that the states’ lawyers told the panel the law became obsolete after the United States left that monetary framework decades ago. (bloomberg.com) The administration’s answer is that Congress left Section 122 on the books, set a clear cap of 15%, and the president stayed below it at 10%. In that reading, the court does not need to decide whether the policy is wise, only whether the statute still gives the White House this temporary power. (pbs.org) (reuters.com) The legal backdrop is why companies are so jumpy. On February 20, 2026, the Supreme Court ruled in Learning Resources v. Trump and Trump v. V.O.S. Selections that the International Emergency Economic Powers Act does not authorize tariffs, shutting down the administration’s earlier attempt to use emergency powers as a catch-all trade weapon. (congress.gov) (law.cornell.edu) That Supreme Court loss did not end the tariff push. It forced the White House into a narrower lane, and Section 122 is that narrower lane because it has a lower ceiling, a 150-day time limit, and a much more specific trigger. (congress.gov) (pbs.org) For importers, the difference between “temporary but legal” and “illegal from the start” is cash. A 10% tariff can change whether a small retailer places a holiday order, whether a manufacturer signs a supply contract, and whether states pay more for equipment bought from abroad. (reuters.com) (news.bloomberglaw.com) The judges did not rule from the bench on April 10, and any decision is likely to be appealed. That means the next fight is not just over one 10% tariff order, but over how much room any future president has to reshape trade without passing a new law through Congress. (reuters.com) (cit.uscourts.gov)
