A federal trade court on Thursday dealt the White House another legal defeat on trade policy, striking down the 10 percent global tariff President Trump imposed after the Supreme Court blocked his earlier, broader import taxes. The U.S. Court of International Trade ruled 2-1 that the replacement levies were "invalid" and "unauthorized by law," and the majority imposed a permanent injunction barring their collection.
The ruling marks the second time this year that federal courts have dismantled a major piece of the administration's tariff agenda. And it raises a blunt question: if the executive branch cannot sustain these tariffs under either the International Emergency Economic Powers Act or Section 122 of the Trade Act of 1974, what legal authority remains?
Judges Mark A. Barnett and Claire R. Kelly found that the Trump administration improperly invoked Section 122, a provision of trade law that grants the president power to impose tariffs to correct "balance of payments deficits" with trading partners. The administration had argued that high U.S. trade deficits and the outflow of American dollars to foreign nations met that statutory threshold.
The majority disagreed. As The Hill reported, the court's opinion stated plainly that the president's proclamation "fails to assert that those required conditions have been satisfied."
"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 Washington Times reported the court drew a sharp distinction between the kind of balance-of-payments emergency Congress envisioned in 1974 and the trade-deficit rationale the White House offered. The court wrote that "rather than identifying 'balance-of-payments deficits' as that term was intended in 1974, the proclamation relies upon current account deficits, and a discussion of 'a large and serious trade deficit.'"
Judge Timothy C. Stanceu dissented. The substance of his dissent was not detailed.
The timeline matters here. Earlier this year, the Supreme Court struck down President Trump's "Liberation Day" import taxes, sweeping tariffs on goods from dozens of global trading partners imposed under the International Emergency Economic Powers Act. That decision prompted the administration to pivot, reaching for a different statutory tool to keep some form of global tariff in place.
In February, Trump imposed the replacement 10 percent tariff on nearly all U.S. imports, this time citing Section 122 of the Trade Act of 1974. The theory: persistent trade deficits with other countries justified the surcharge under a law designed to address balance-of-payments problems.
Challengers, including Washington state and two small businesses, argued the move was an end-run around the Supreme Court's earlier ruling. Thursday's decision validated that argument.
The AP reported that the ruling directly blocked tariff collection from the plaintiffs and could encourage more importers to seek refunds and broader relief. That opens the door to a cascade of claims that could further erode the tariff framework.
The outcome did not come as a surprise to close observers. Before the ruling, the three-judge panel had signaled deep skepticism of the government's legal theory during oral arguments. Fox News reported that one judge directly challenged a Justice Department lawyer on the administration's core claim.
"Are you really saying that a large trade deficit alone is sufficient? I don't think it is, and I think Congress didn't think it is."
That exchange cut to the heart of the dispute. Section 122 was written in an era when balance-of-payments crises meant something specific, a country running short on foreign reserves, facing a genuine monetary emergency. The administration's argument stretched that concept to cover any persistent trade imbalance, a reading the court found unsupported by the statute's text or history.
Jeffrey Schwab, a lawyer for the challengers, told the court the government's theory was "very, very, very broad" and could let the president act "at any point, at any moment that he wants, forever." That framing clearly resonated with the majority.
For the small businesses that brought the challenge, the ruling was immediate relief. Jay Foreman, CEO of Basic Fun!, one of the plaintiffs, did not hide his reaction.
"We fought back today and we won, and we're extremely excited."
Foreman also framed the stakes in broader terms, telling reporters that "unlawful tariffs make it harder for businesses like ours to compete and grow." The New York Post described the ruling as a victory for small businesses that rely on global manufacturing to deliver affordable products.
That's a real concern. A 10 percent across-the-board levy hits hardest at companies without the margins or supply-chain flexibility to absorb it, the neighborhood toy company, the regional importer, the family-owned distributor. Those are the businesses that end up passing costs to consumers or cutting staff when tariffs land without clear legal footing.
The White House now faces a legal landscape that has shrunk considerably. The Supreme Court already rejected the IEEPA route. The Court of International Trade has now rejected the Section 122 route. The administration previously raised the global levy to 15 percent after the Supreme Court's initial ruling, signaling a willingness to escalate. But escalation requires a legal vehicle, and the courts have now taken two off the road.
An appeal is almost certain. The question is whether a higher court will read Section 122 more broadly, or whether the statutory text simply cannot bear the weight the administration has placed on it.
There are legitimate conservative arguments for robust trade enforcement. Persistent deficits do erode American manufacturing. Foreign competitors do exploit open markets. But the constitutional order demands that the executive branch act within the authority Congress actually granted, not the authority it wishes Congress had granted.
The administration's reaction to the earlier Supreme Court tariff ruling showed a White House willing to move fast and find new legal ground. That instinct is understandable. But speed without legal durability produces exactly what happened Thursday: another injunction, another headline, and another round of uncertainty for every American business trying to plan around trade policy.
Several important details remain unclear. The specific case name and docket number were not widely reported. The substance of Judge Stanceu's dissent, which could shape the appeal, has not been detailed. And the full scope of downstream consequences, including potential refund claims by other importers, is still taking shape.
What is clear is the pattern. The administration has now lost on tariffs twice in rapid succession, under two different statutes, in two different courts. The White House has shown no reluctance to fight back against institutional opposition. But courts operate on text, not momentum.
If the goal is durable tariff policy that actually reshapes trade, the path runs through Congress, not through creative readings of 50-year-old statutes that judges keep rejecting. Executive action is fast. Legislation is slow. But legislation sticks.
Two courts have now said the same thing in different ways: the president's trade agenda needs a legal foundation that matches its ambition. Until it gets one, every tariff built on borrowed authority is one ruling away from collapse.
