Tariffs Face Court Fight

A court in lower Manhattan spent Friday asking a basic question with billion-dollar consequences: can the White House put a 10% tax on nearly everything the United States imports just by declaring a trade problem? The case is in the U.S. Court of International Trade, the federal court that handles customs fights. (apnews.com) The tariff at issue took effect on February 24, 2026, after the Supreme Court had already struck down most of the administration’s earlier emergency tariffs on February 20, 2026. The new version uses Section 122 of the Trade Act of 1974 instead of the International Emergency Economic Powers Act, which is the law the Supreme Court said did not authorize tariffs. (reuters.com) (congress.gov) Section 122 is a rarely used backup lever from the 1970s. It lets a president respond to a “large and serious” balance-of-payments deficit, but it also caps the tariff at 15% and limits it to 150 days unless Congress acts. (congress.gov) (bakerdonelson.com) That is why the courtroom argument is not really about whether tariffs are good or bad. It is about whether today’s trade deficit fits a law written for a different problem, back when the United States was still unwinding the old gold-linked monetary system. (bloomberg.com) (congress.gov) The plaintiffs are 24 mostly Democratic-led states plus two small businesses. They told the judges the administration is trying to rebuild a tariff wall the Supreme Court just knocked down, using a narrower statute that was never meant for a broad, near-universal import tax. (reuters.com) (politico.com) The administration’s answer is that Congress gave the president this tool and set the ceiling at 15%, so a 10% rate is inside the statute. Government lawyers argued that chronic trade deficits are enough to trigger Section 122 and that courts should give the executive branch room on trade policy. (apnews.com) (reuters.com) The judges did not sound fully convinced. Reuters reported that the panel pressed government lawyers on whether a large trade deficit by itself is enough to justify tariffs that hit imports from almost every country. (reuters.com) For import-heavy companies, the legal fight lands in the middle of purchase orders, not theory. A 10% duty can erase the margin on a low-cost appliance, a toy, or a box of electronic parts the same way a surprise toll can wipe out the profit on a delivery route. (reuters.com) That is why buyers are already changing behavior before any ruling arrives. Global Sources said its Hong Kong electronics show, which opened April 11 and is expected to draw more than 60,000 business buyers, is seeing heavier interest in supplier diversification as tariff rules keep shifting. (prnewswire.com) Supplier diversification means a retailer that used to buy one product from one factory in one country now tries to line up two or three factories in different places. Nearshoring is the same instinct pushed closer to home, moving some production to countries like Mexico so shipping times and tariff exposure are easier to manage. (prnewswire.com) The court has not ruled yet, and any decision is likely to be appealed. Until that happens, companies are pricing goods, signing contracts, and choosing factories with one eye on a statute from 1974 and the other on a three-judge panel in New York. (cit.uscourts.gov) (reuters.com)