Tariff case adds uncertainty

Three judges in New York spent nearly three hours on April 10 asking whether the White House used the wrong law for a 10 percent tariff that now hits almost all imports. The judges sounded stuck on a basic question: can a 1974 statute built for old currency crises really justify a worldwide import tax in 2026? (politico.com) This fight is happening in the United States Court of International Trade, a specialized federal court at 1 Federal Plaza in Manhattan that handles customs and trade disputes nationwide. The hearing covered two cases at once, including one brought by 24 states and another brought by small businesses. (cit.uscourts.gov, reason.com) The tariff at issue did not come out of nowhere. It was announced after the Supreme Court ruled on February 20, 2026, that the International Emergency Economic Powers Act did not let the president impose the earlier round of sweeping tariffs. (libertyjusticecenter.org, politico.com) So the administration switched to Section 122 of the Trade Act of 1974. That law lets a president impose a temporary global duty of up to 15 percent for no more than 150 days if the United States faces a “large and serious” balance-of-payments problem or a sharp dollar problem. (reason.com, politico.com) A balance-of-payments problem is not the same thing as a trade deficit. It is the country-level ledger of money flowing in and out across trade, investment, and finance, and the challengers say Congress wrote Section 122 for the exchange-rate world of the early 1970s, not for today’s floating-dollar system. (politico.com, reason.com) That old system matters because the Bretton Woods currency regime had already collapsed by 1973, before Section 122 became law. The challengers argue that Congress was writing for a world in which governments were still trying to defend fixed exchange rates, like keeping a price tag nailed to the wall even when the market outside had moved. (reason.com) One of the roughest moments for the government came when Judge Timothy Stanceu pressed Justice Department lawyer Brett Shumate on the current balance-of-payments deficit. According to accounts of the hearing, Shumate repeatedly said he could not state what the number is, or even estimate it. (reason.com) The judges also pushed on how broad the government’s reading would be. If Section 122 can be triggered whenever the United States runs persistent external deficits, then a law with a 15 percent cap starts to look less like an emergency tool and more like a standing license for presidents to tax imports whenever they want. (reason.com) The businesses in the case are not abstract plaintiffs. Liberty Justice Center says Burlap and Barrel and Basic Fun! sued after the February 24 tariff order raised their import costs, and the states argue the same order raises prices and scrambles budgeting for public purchases. (libertyjusticecenter.org, apnews.com) The timing is part of the pressure. Politico reported that the duties are set to expire in July unless Congress extends them, which means importers are trying to price summer and fall shipments while the legal floor under the tariff is still being argued. (politico.com) That leaves companies in a familiar trade-policy trap. If they lock in suppliers assuming the 10 percent tariff stays, they could overpay if the court kills it, and if they assume it disappears, they could get hit on arrival if the court upholds it or the administration finds another legal path. (apnews.com, politico.com) No ruling came from the bench on April 10. What the hearing did show is that the next decision may reach past one 10 percent tariff and answer a bigger question: how much room Congress left presidents to redraw import costs on their own. (politico.com, reason.com)