Federal Court Rules Trump’s 10% Universal Tariffs Illegal, Appeal Likely

The U.S. Court of International Trade ruled on Thursday that President Trump’s 10% universal tariffs were illegal, though the duties will likely remain in place while the administration files an appeal. The decision adds to a series of legal setbacks for the White House’s trade policy.

Background: How the Tariffs Were Imposed

Following the Supreme Court’s February ruling that struck down the bulk of Trump’s tariffs, the administration turned to Section 122 of the Trade Act of 1974—a provision never before used—to impose a 10% across-the-board surcharge. This tariff was set to expire on July 24.

The Trade Act of 1974 allows the president to impose temporary tariffs of up to 15% for up to 150 days to address "large and serious" balance-of-payments deficits. The administration argued that the current account deficit justified the tariffs.

Legal Challenge and Court Ruling

The lawsuit was brought by a spice company and a toy retailer, represented by the Liberty Justice Center. The trade court dismissed claims from 23 of the 24 state attorneys general, ruling that their alleged harms from the tariffs were too indirect to establish standing.

In a 2-1 decision, the court ruled that the president’s interpretation of "balance-of-payments deficit" was overly broad. The judges wrote:

"If the President has the ability to select among the sub-accounts to identify a balance-of-payments deficit, unless every sub-account is balanced, the President would always be able to identify a balance-of-payments deficit. Such an expansive reading of the statute would give Trump unlimited tariff power that belongs to Congress."

Defining the Crisis

During last month’s hearing, the court examined how to define a "balance-of-payments crisis." The government argued that the current account deficit—the broadest measure of U.S. payments to the rest of the world—was the modern equivalent of what Congress intended. The plaintiffs countered that the type of monetary crisis the law was designed to address no longer exists since the U.S. abandoned the gold standard in the 1970s.

What’s Next?

Legal experts anticipate an appeal by the administration. Tim Brightbill, co-chair of Wiley Rein’s international trade practice, told Axios:

"This decision will surely be appealed by the administration, and there is already a 'plan C' in place: the section 301 investigations that are already underway."

A White House spokesperson did not immediately respond to a request for comment.

Key Takeaways

• The tariffs were imposed under Section 122 of the Trade Act of 1974, a rarely used provision.
• The court ruled that the president’s interpretation of "balance-of-payments deficit" was unconstitutionally broad.
• The tariffs are set to expire on July 24, and the administration has signaled plans to replace them before then.
• This is the latest in a series of legal defeats for Trump’s tariff policies.

The administration may not need to win in court if it enacts replacement tariffs before the current ones expire.