The Court of International Trade (CIT) recently handed down a decision that may significantly impact the White House’s capability to impose tariffs, signaling a pivotal moment in U.S. trade policy. This decision emerged from a lawsuit initiated by 24 states and businesses arguing that a 10% global tariff imposed by former President Trump in February, under Section 122 of the Trade Act of 1974, was legally untenable. The CIT’s three-judge panel confirmed this view, deeming the temporary tariffs “unlawful” and detrimental to businesses.
This development is part of a broader legal contestation surrounding the trade measures enacted by the Trump administration. Earlier in the year, the Supreme Court invalidated tariffs that had been instituted under the International Emergency Economic Powers Act (IEEPA), concluding that they, too, were improperly imposed. The fallout from these legal decisions has prompted a logistical and financial response: the U.S. government is expected to refund approximately $175 billion in tariffs to importers, prompting the set-up of a dedicated portal by the U.S. Customs and Border Protection for the submission of refund claims.
Despite these setbacks, Trump and his representatives maintain a defensive stance. White House spokesman Kush Desai underscored Trump’s belief in the legality and necessity of these tariffs. “President Trump has lawfully used the tariff authorities granted to him by Congress to address our balance of payments crisis,” Desai stated, underscoring an ongoing commitment to exploring legal avenues to uphold the tariffs. This stance reflects a broader argument from Trump administration officials who have championed tariffs as essential tools for safeguarding U.S. industries, ensuring fair international trade practices, and generating federal revenue.
Within the landscape of U.S. tariff policies, however, the CIT’s ruling is both specific and limited. It applies solely to the plaintiffs involved in the lawsuit—two businesses and the state of Washington—over the so-called Section 122 tariffs. As a result, its immediate implications on U.S. tariff rates are minimal. Capital Economics notes that the average effective tariff rate remains at 7.2%. Stephen Brown, chief North America economist at the investment advisory firm, remarked that because these tariffs are already set to expire at the end of July, “none of this has any immediate implication for the U.S. tariff rate.”
However, for businesses managing import costs, the narrow scope means a continuation of status quo tariffs on most goods. “They have to keep doing what they’ve been doing. If I am a business today, for practical purposes, nothing changes today compared to yesterday,” said Blake Harden, a trade policy expert at Ernst & Young, anticipating a prompt appeal from the Trump administration.
The specificities of the ruling indeed suggest a future filled with continued legal challenges. Lizbeth Levinson, a trade attorney at Fox Rothschild, predicts that more businesses might litigate to avoid these tariffs, potentially seeking refunds depending on their financial burdens from duties paid. She advised companies to diligently track any Section 122 duties paid, to prepare for possible refund opportunities.
In response to these ongoing judicial rebuffs, the Trump administration appears to be pivoting towards other legislative mechanisms. For instance, in March, it launched investigations into the trade practices of foreign nations under Section 301 of the Trade Act of 1974. Unlike Section 122, Section 301 demands a thorough investigation of a country’s trade practices before the U.S. can impose any retaliatory tariffs or restrictions. Harden commented, “This decision reinforces that 301 is the tool they are most likely to rely upon and have the best chance at a durable tariff regime. I think 301 is the name of the game for them moving forward.”
Yet, this shift to Section 301 does not insulate the administration from further judicial pushback. According to Brown’s analysis, the CIT’s decision “once again highlights the judicial pushback that the administration is likely to face when it tries to follow through with tariffs under its more recent Section 301 investigations against 60 countries.” This implies a continued risk that efforts to replace revenue lost from the annulled IEEPA tariffs might not succeed in the face of prospective legal challenges.
Clearly, the terrain of U.S. trade policy remains fraught and contested, marked by judicial decisions that constrain executive actions and the enduring tension between national economic strategies and international trade obligations. As these legal and policy battles unfold, businesses and policymakers alike will have to navigate a complex and shifting landscape, balancing immediate economic pressures against long-term strategic and judicial considerations.
