US tariffs face court scrutiny
A trade‑court panel questioned the legality of President Trump’s 10% global tariff, suggesting a large trade deficit alone may not legally justify broad‑based tariffs. That judicial uncertainty increases policy risk for capital plans tied to cross‑border supply chains and could push corporate transition projects to emphasise localisation and resilience. (reuters.com)
Three judges in New York spent hours on Friday asking a basic question with billion-dollar consequences: can a president put a 10% tax on almost everything the country imports just by pointing to the trade deficit. The panel did not sound convinced that the law says yes. (reuters.com) The tariff at issue took effect on February 24, 2026, just four days after the Supreme Court ruled on February 20, 2026 that the International Emergency Economic Powers Act does not let a president impose tariffs. The new plan was built on a different law, Section 122 of the Trade Act of 1974. (sidley.com) (whitehouse.gov) Section 122 is a narrow emergency valve, not a blank check. The statute lets a president impose a temporary import surcharge of up to 15% for 150 days when the United States faces “large and serious” balance-of-payments problems or a fast dollar slide. (law.cornell.edu) (congress.gov) That phrase matters because a trade deficit and a balance-of-payments deficit are not the same thing. A trade deficit is goods and services coming in faster than they go out, while balance of payments is the full ledger that also includes capital flowing into U.S. assets like Treasury bonds, stocks, and factories. (everycrsreport.com) (axios.com) The United States has run trade deficits for decades without looking like a country short of foreign financing. In fact, foreign investors regularly buy U.S. assets at a scale that offsets those trade gaps, which is why the judges kept pressing lawyers on whether Congress in 1974 meant today’s trade imbalance or an old-style currency crisis. (axios.com) (congress.gov) The challengers are 24 mostly Democratic-led states and two small businesses, and they say the White House is trying to reroute around the Supreme Court after losing the first tariff fight. The hearing was in the U.S. Court of International Trade, the specialist court that handles customs and trade cases. (reuters.com) (apnews.com) The administration’s defense is that Section 122 gives the president room to act first and that courts should not second-guess the judgment that the country has a payments problem. One judge pushed back by asking whether that theory would let the president define almost any trade gap as an emergency and then tax imports across the board. (politico.com) (reason.com) Even if the government wins this round, Section 122 has a built-in clock. The law allows 150 days unless Congress extends it, which means any company treating the tariff as a permanent fixture still has to price in legal risk and political risk at the same time. (law.cornell.edu) (whitehouse.gov) That is why this case reaches far beyond customs lawyers. A factory deciding where to source parts, a retailer signing a holiday inventory contract, or a manufacturer choosing between Mexico, Vietnam, and Ohio is now making plans around a tariff that could survive, expire, or be struck down. (reuters.com) (abcnews.go.com) The odd part is that the courtroom fight is not really about whether tariffs are good economics. It is about who gets to use them, under what exact words Congress wrote in 1974, and whether “trade deficit” can be stretched to cover a law built for something closer to a payments emergency. (reuters.com) (congress.gov)
