U.S. trade court questions 10% tariff basis

A three-judge trade court in New York spent Friday asking a basic question the administration struggled to answer: what exactly is the “balance-of-payments deficit” that would let a president slap a 10% tariff on goods from nearly every country. Judges on the U.S. Court of International Trade sounded doubtful that the modern U.S. trade gap fits that old legal phrase. (reuters.com) (axios.com) The tariff at issue took effect on February 24, 2026, and it was imposed under Section 122 of the Trade Act of 1974, a law that lets a president put on a surcharge of up to 15% for up to 150 days. The administration chose 10% and argued that the United States’ persistent goods trade deficit justified it. (pbs.org) (reuters.com) This case exists because the administration had already lost a bigger tariff fight one level up the legal ladder. On February 20, 2026, the Supreme Court held that the International Emergency Economic Powers Act does not let a president impose tariffs, wiping out the legal theory behind the earlier 2025 tariff rounds. (hklaw.com) (mondaq.com) Within hours of that Supreme Court ruling, President Donald Trump announced the new global tariff under the 1974 trade law instead. The switch mattered because Section 122 is narrower than the emergency-powers law, but it is still one of the few statutes that lets a president move first and ask Congress later. (hklaw.com) (reuters.com) The plaintiffs are 24 mostly Democratic-led states plus two small businesses, and they say the administration is stretching a 1974 law built for a different era. Their argument is that Congress wrote Section 122 for a genuine payments crisis, not for the ordinary fact that Americans buy more imported goods than they sell abroad. (reuters.com) (nationaltoday.com) That distinction sounds technical, but it is the whole case. A trade deficit is a running gap between imports and exports, while a balance-of-payments crisis is closer to a country running short of the money or foreign exchange needed to pay its bills, and the judges suggested those are not the same thing. (axios.com) (pbs.org) One judge pressed government lawyers on whether the United States, which issues the dollar and finances itself in deep global capital markets, can really claim the kind of payments emergency Congress had in mind in the 1970s. Reuters reported that the panel appeared unconvinced that a large trade deficit by itself unlocks such broad tariff power. (reuters.com) (axios.com) The administration answered that Section 122 does not define the phrase tightly and gives the president room to act when imports are persistently outrunning exports. That is a legal gamble, because the less specific the statute looks, the more the court has to decide whether Congress really meant to hand over a tax power this broad. (aljazeera.com) (reuters.com) For companies, the immediate problem is not just the 10% itself. It is that import costs, contract terms, and factory plans now depend on a court reading a half-century-old phrase that could knock the tariff out, leave it in place for the rest of the 150-day window, or send the fight into another appeal. (pbs.org) (reuters.com) The deeper fight is over who controls tariffs in the first place. Article I of the Constitution gives Congress the taxing power, and these cases are forcing judges to decide how much of that power Congress actually delegated to presidents through old trade and emergency laws. (hklaw.com) (kpmg.com) So the hearing on April 10, 2026 was not really about one 10% line item at the border. It was about whether a president can keep rebuilding tariff policy from one old statute after another each time a court knocks the last one down. (reuters.com) (pbs.org)