Court questions 10% tariffs

Three judges in New York spent Friday asking a blunt question: if the United States buys more goods than it sells, does that alone let a president slap a 10% tax on imports from almost every country? The case is in the U.S. Court of International Trade, the specialist court that handles customs and trade fights. (reuters.com) (cit.uscourts.gov) The tariff at issue took effect on February 24, 2026, and U.S. Customs and Border Protection told importers it was an extra 10% duty on goods from every country unless a specific exemption applied. Customs described it as a temporary measure tied to Section 122 of the Trade Act of 1974. (govdelivery.com) (federalregister.gov) Section 122 is not the emergency law Trump used for earlier tariffs. It is a 1974 law written for “fundamental international payments problems,” and it caps a temporary import surcharge at 15% for 150 days unless Congress extends it. (law.cornell.edu) (whitehouse.gov) That 150-day limit is why this case matters beyond one courtroom. If the government loses, a tariff that importers have been paying since late February could be blocked before the temporary window runs out, forcing companies to rethink prices and shipments fast. (law.cornell.edu) (reuters.com) The challengers are 24 mostly Democratic-led states and two small businesses. They argue Trump switched legal tools after the Supreme Court struck down most of his earlier tariffs and is now stretching an old balance-of-payments law far beyond what Congress meant. (reuters.com) (apnews.com) The administration says the legal hook is the U.S. trade gap. In the February 20 proclamation, Trump said the country faced “fundamental international payments problems” and pointed to trade imbalances, the dollar, and broader external accounts as the reason for the surcharge. (whitehouse.gov) (federalregister.gov) The judges did not sound fully persuaded that a goods trade deficit and a balance-of-payments problem are the same thing. Reuters reported that the panel pressed government lawyers on whether a broad import tax can rest on that theory, and Axios reported the hearing turned on the meaning of the phrase “balance-of-payments deficit.” (reuters.com) (axios.com) That distinction sounds technical, but it is the whole case. A trade deficit is the gap between imported goods and exported goods, while a balance-of-payments measure is a wider national ledger that also includes services, investment income, and money flows with the rest of the world. (law.cornell.edu) (federalregister.gov) Businesses care because tariffs work like a toll booth at the border. A 10% duty paid by an importer can end up in wholesale prices, retail prices, or thinner profit margins, depending on how much leverage a seller has and how quickly contracts can be rewritten. (pbs.org) (apnews.com) This is also the latest round in a bigger legal pattern. NBC News reported that Trump first tried to justify global tariffs under the International Emergency Economic Powers Act of 1977, and Reuters reported that challengers say the new Section 122 tariff was designed to sidestep the Supreme Court ruling that knocked most of those earlier tariffs out. (nbcnews.com) (reuters.com) So the court is not deciding whether tariffs are good economics in the abstract. It is deciding whether Congress, in a statute passed in 1974, really handed the president a short-term power to tax nearly all imports whenever the country runs the wrong kind of deficit. (law.cornell.edu) (reuters.com)