A fresh judicial setback has landed on President Donald Trump’s trade agenda, with a U.S. trade court declaring his recently imposed 10% global tariffs unlawful under a decades-old trade statute. Yet the ruling stopped short of dismantling the policy nationwide, limiting relief to only a handful of challengers.
The decision from the U.S. Court of International Trade carved out protection for toy maker Basic Fun!, spice importer Burlap & Barrel, and the State of Washington, while allowing the tariffs to continue applying to nearly every other importer across the country as appeals move forward. The temporary duties are currently scheduled to lapse in July.
In a split 2-1 ruling, the court found that the administration had stretched Section 122 of the Trade Act of 1974 beyond its intended purpose. That provision permits temporary tariffs of up to 15% for a limited period when the U.S. faces severe balance-of-payments problems or looming currency instability. Judges concluded the White House had failed to show that such conditions actually existed.
The legal blow arrives only months after the U.S. Supreme Court struck down another sweeping Trump tariff framework that had been justified under emergency economic powers. Following that defeat, the administration pivoted to Section 122 in an effort to keep broad import duties alive.
Trump reacted sharply to the latest ruling, accusing the court of political bias and signaling that his administration would continue pursuing alternative legal avenues to maintain aggressive tariff measures.
Despite the courtroom loss, the administration’s larger trade strategy is far from abandoned. Officials are expected to lean heavily on Section 301 of the same trade law — a mechanism traditionally used against unfair foreign trade practices. Multiple Section 301 investigations are already underway and could pave the way for more durable tariffs later this year.
The court, however, refused to grant a nationwide injunction sought by a coalition of 24 mostly Democratic-led states. Judges said most of those states lacked legal standing because they were not direct importers paying the challenged tariffs. Washington State was treated differently after presenting evidence that the University of Washington had incurred tariff costs through imported goods.
The ruling creates an unusual situation: the tariffs remain intact for the overwhelming majority of businesses, even though the court found the legal foundation behind them defective.
Basic Fun! welcomed the judgment, saying the duties had distorted competition and increased costs for companies dependent on international manufacturing networks. Burlap & Barrel had similarly argued that the administration was attempting to sidestep the Supreme Court’s earlier rejection of Trump-era trade measures.
Trade lawyers now expect a prolonged appellate battle that could eventually reach the Supreme Court once again. Legal experts also say other importers may rush to file their own lawsuits seeking refunds or exemptions before the tariffs expire.
At the center of the dispute is the administration’s claim that America’s massive trade deficit — roughly $1.2 trillion in goods — qualified as the kind of emergency Section 122 was designed to address. Economists had widely questioned that interpretation from the outset, arguing that the United States was not facing the type of financial crisis historically associated with balance-of-payments emergencies.
Even with the court ruling, analysts believe the administration may continue collecting most of the tariffs until late July unless higher courts intervene sooner. Whether businesses ultimately receive refunds could depend on how quickly appeals are resolved — and whether the White House chooses to replace the temporary duties with a more permanent tariff regime before then.
