E-Paper
US trade court deals fresh blow to Trump's 10% tariffs, says not justified
The 2-1 ruling by the US trade court means the tariffs will remain in force for all other importers while the Trump administration pursues an appeal.
In a fresh tariff setback for US President Donald Trump, the US Court of International Trade ruled that the Trump administration’s 10% “universal” tariff levied on imports from India and countries around the world is illegal. The ruling injects fresh uncertainty for companies around the world and follows closely after the US Supreme Court struck down Trump’s efforts to impose global reciprocal tariffs through the International Emergency Economic Powers Act (IEEPA) this February.
Immediately after the Supreme Court’s ruling in February, the Trump administration invoked economic powers under Section 122 of the Trade Act of 1974 to levy a 10% “universal” tariff on all global imports. The legal statute grants the US President to levy tariffs in order to remedy “large and serious United States balance-of-payments deficits.”
In its ruling today, the New York-based Court of International Trade found by a 2-1 decision that the Trump administration had not.
“This case turns on the meaning of Section 122 and whether the President asserted the existence of the conditions required by the statute in order to lawfully proclaim the import surcharges. As discussed further below, the President’s Proclamation fails to assert that those required conditions have been satisfied,” the court judgement reads.
Former US trade negotiators believe that the ruling, while a setback for President Trump, will not deter his administration from implementing global tariffs through other means. Washington has already set in motion plans to levy fresh global tariffs through Section 301 of the Trade Act of 1974, which allows the use of levies on countries that employ unfair trading practices against the United States.
“This is a clear setback for the Trump administration, but I don’t think it will alter the game plan to use the Section 301 investigations to replace the IEEPA tariffs. The administration will be on much more solid ground in defending against future challenges to Section 301 tariffs, and it clearly plans to leverage these tariffs to maintain all the agreements it has already negotiated and conclude pending ones, such as the Interim Agreement with India,” says Mark Linscott, senior advisor for trade policy at the US India Strategic Partnership Forum. Linscott previously served as Assistant US Trade Representative for South and Central Asia.
In March, the Trump administration announced it would launch Section 301 investigations into 16 major global economies, including India, for alleged unfair manufacturing practices. Public hearings are scheduled for this week. Washington plans to use these Section 301 investigations to replace earlier tariffs imposed by Trump in 2025.
“We should expect an appeal by the Justice Department, which would keep the Section 122 tariffs in the courts until Section 301 tariffs are implemented. The Section 122 tariff would expire on July 24 anyhow. Thereafter the courts can decide if the Section 122 tariffs must be refunded, like the IEEPA tariffs,” said Kurt Tong, managing partner at the Asia Group and a former diplomat with extensive experience in trade negotiations.
Kurt Tong of the Asia Group believes the Trump administration’s second judicial defeat today will lead to more caution on the part of the White House.
“This second court defeat on tariffs may make USTR a bit more cautious in how they construct the expected upcoming wave of Section 301 tariffs, which the White House intends to bring tariffs back up to the levels existing at the beginning of the year. USTR’s approach to Section 301 cases seemed confident when it built its cases around “overcapacity” and “forced labor” in April. Now it may worry more that businesses could successfully challenge that approach in U.S. trade courts,” says Tong.
