A federal court on Thursday ruled that President Donald Trump illegally used Section 122 of the Trade Act of 1974 to impose a 10 percent global tariff — a backup plan the president implemented after the Supreme Court struck down his largest global tariffs earlier this year.
A divided three-judge panel at the United States Court of International Tradehe concluded that Trump’s Plan B was similarly illegitimate. And the two-judge majority blocked the administration from collecting duties from Washington state and two companies that sued over the policy.
The court did not grant nationwide relief to the hundreds of thousands of importers who have paid or continue to pay the tariffs, but it has set a precedent that other companies can point to in any legal efforts to pursue such relief.
While 24 Democratic-led states, spice importer Burlap and Barrel and toy company Basic Fun challenged the policy, the panel found that only Washington and those two companies had standing, leaving the order up to the plaintiffs.
of TrumpFebruary announcementimposing the new tax “is invalid, and the tax imposed on the Plaintiffs is not authorized by law,” Judges Mark Barnett and Claire Kelly, both Obama appointees, wrote for the panel’s majority. Judge Timothy Stanceu, a George W. Bush appointee, dissented.
Section 122 allows the president to impose temporary tariffs of up to 15 percent for a period of up to 150 days when the United States faces “fundamental problems of international payments,” including “large and severe U.S. payments deficits.”
Trump’s attempt to apply the law to a replacement tax waslegally from the beginning.Democratic-led states, businesses and trade lawyers argued that the Nixon-era law never applied to broad modern tax policy and was instead intended for small balance of payments and currency emergencies. During oral arguments last month, a three-judge panel openly questioned whether the law could justify Trump’s tax plan at all.
The Trump administration is still seeking to restore the balance of its tax administration by using alternative powers. In March, the Office of the US Trade Representative launched investigations into several countries under a separate authority – Section 301 of the Trade Act of 1974 – that is expected to result in significant tariffs this summer.
Jeffrey Schwab, senior attorney and litigation director at the Freedom Justice Center, which represents Burlap and Barrel and Fun Basic, celebrated the decision.in a statement,to emphasize Section 122 is not designed to deal with long-term trade deficits.
“Congress authorized the President to impose tariffs where the United States was faced with fundamental problems of international payments and needed to respond to a larger and larger balance of payments deficit,” Schwab said. “That’s not the case here.”
Kyle Cheney contributed to this report.
