The U.S. Court of International Trade issued a landmark ruling striking down President Donald Trump’s 10% global tariff imposed on trading partners worldwide.
The court ruled that Trump’s global tariff could not be justified under the Trade Act of 1974.
This decision stemmed from a lawsuit filed by American small businesses claiming they were harmed by the tariff. In a 2-1 decision, the court sided with the plaintiffs, although one judge dissented, arguing it was premature to rule in favor of the small business plaintiffs.
On February 24, President Trump imposed a 10% global tariff on all imported goods, with exceptions for certain items such as automobiles and steel. This action was based on an executive order invoking Section 122 of the Trade Act of 1974.
Section 122 permits tariffs for up to 150 days to address significant trade deficits or a sharp decline in the dollar’s value.
The plaintiffs contended that this move was an attempt to circumvent a Supreme Court ruling that had invalidated Trump’s reciprocal tariffs, which were based on the International Emergency Economic Powers Act (IEEPA).
Previously, Trump had imposed a 15% reciprocal tariff on major countries, including the European Union, Japan, and South Korea, under the IEEPA. However, a federal court ruled in February that this exceeded the law’s authority, prompting the implementation of the global tariff under Section 122 of the Trade Act, which has now also been struck down.
In its ruling, the court determined that the trade deficit situation presented by Trump did not meet the threshold required to apply Section 122 of the Trade Act of 1974.
In response to the Supreme Court’s decision against the reciprocal tariffs, the Trump administration imposed the 150-day global tariff as a stopgap measure. Their ultimate plan is to replace the reciprocal tariffs with additional tariffs under Section 301 of the Trade Act, which empowers the president to impose tariffs if a foreign country engages in unfair trade practices, such as overproduction.