Court tests Trump's tariffs

A trade court in New York spent more than three hours on April 10 asking a basic question about President Donald Trump’s new 10% tariff: does a big trade deficit, by itself, let a president tax nearly every import that enters the United States? The case landed in the United States Court of International Trade because that court handles customs and trade fights, and this one reaches far beyond one product or one country. The plaintiffs include 24 states led by Oregon and a group of small businesses that buy imported goods. Trump is using Section 122 of the Trade Act of 1974, a law that lets a president impose a temporary import surcharge of up to 15% for 150 days. The statute says that power is for “fundamental international payments problems,” including a “large and serious” balance-of-payments deficit or an imminent drop in the dollar. That is not the law Trump first tried. On February 20, 2026, the Supreme Court ruled 6-3 that the International Emergency Economic Powers Act does not authorize tariffs, wiping out the broader tariff program the administration had defended as an emergency measure. Within hours, the White House switched to this backup route and announced the 10% global surcharge under Section 122. Customs guidance says the new duties took effect on February 24 and, unless Congress extends them, run through July 24, 2026. The administration’s argument is that the United States has a large and serious external imbalance, and that imports can be restrained with a temporary surcharge while officials try to reset trade flows. The February 20 proclamation says advisers pointed Trump to balance-of-payments concerns, the dollar’s position in currency markets, and the need to deal with large and serious deficits. The challengers say Section 122 was written for a very different problem, more like a pressure valve for a currency crisis than a standing license to answer normal trade gaps. In court, lawyers for the states argued that routine goods deficits are not the same thing as the kind of payments emergency Congress had in mind in 1974. Judges appeared uneasy with both sides, but the sharpest questions went to the government’s theory that a trade deficit alone could unlock this power. Reuters reported that the panel pressed government lawyers on whether the statute’s language about international payments problems means something narrower than simply buying more goods from abroad than the country sells. The practical problem is that even a temporary tariff changes prices before any final ruling arrives. Importers pay the duty at the border, suppliers rework contracts, and companies that rely on foreign parts—from retailers to repair shops—have to guess whether the extra 10% will still be there in a month. That uncertainty is the real story now. If the court strikes the tariff down, the administration may appeal and importers may chase refunds again; if the court lets it stand, the 150-day clock still points to July 24 unless Congress steps in. So the court is not deciding whether tariffs are good economics. It is deciding whether Congress gave one president the power to put a near-economy-wide tax on imports using a half-century-old law that had never been used this way before February 2026. (/)