In a decisive blow to the administration’s trade agenda, the U.S. Court of International Trade ruled on Thursday, May 7, that the executive order imposing a 10% global tariff is void. The court determined that the policy, which sought to apply a broad tariff across all global imports, lacked the necessary legal justification to be enforceable.
This ruling marks the second major judicial defeat for President Donald Trump’s tariff strategy in recent months. The court found that the administration’s reliance on specific trade laws to bypass congressional authority was unfounded, effectively halting a policy that has caused significant uncertainty for thousands of international businesses and importers.
The decision comes amid a period of intense legal scrutiny over the executive branch’s power to levy taxes and tariffs, a power that the U.S. Judicial system has increasingly reaffirmed belongs to Congress under the Constitution. For global markets, the ruling provides a temporary reprieve, though it signals a continuing volatile clash between the White House and the judiciary over the future of American trade policy.
The Legal Failure of Section 122
To implement the 10% global tariff, the Trump administration invoked Section 122 of the Trade Act of 1974. This specific legal provision allows the U.S. Government to impose temporary tariffs for a maximum of 150 days, but only under very strict conditions: specifically, when the U.S. Is facing a severe international balance of payments deficit or when the U.S. Dollar is at risk of significant devaluation.
However, in a 2-1 decision, the U.S. Court of International Trade ruled that the administration’s justification—citing general trade deficits—did not meet the specific legal thresholds required by Section 122. The court concluded that the measures lacked a sufficient legal basis, essentially ruling that a general trade deficit is not the same as the specific economic crises the 1974 Act was designed to address.
The lawsuit was brought forward by a group of tiny businesses. These plaintiffs argued that the administration was not genuinely responding to a balance-of-payments crisis but was instead attempting to circumvent previous legal restrictions placed on the president’s ability to unilaterally impose tariffs.
While the majority of the court agreed with the plaintiffs, one judge issued a dissenting opinion, arguing that it was premature to rule in favor of the plaintiffs at this stage of the proceedings.
A Pattern of Judicial Rejection: From IEEPA to Section 122
This latest ruling is a direct sequel to a landmark decision by the U.S. Supreme Court on February 20. In that case, the Supreme Court ruled 6-3 that tariffs imposed under the International Emergency Economic Powers Act (IEEPA) were unconstitutional and exceeded executive authority. The high court emphasized that the power to levy taxes and tariffs resides with Congress, as stipulated in Article 1, Section 8 of the U.S. Constitution.
The fallout from the February Supreme Court ruling was immense. Following that decision, U.S. Customs and Border Protection (CBP) was required to initiate a massive refund process. The government must return approximately $166 billion in collected tariffs to more than 330,000 importers, covering an estimated 53 million shipments.
Following the IEEPA defeat, the administration pivoted to the Trade Act of 1974, attempting to frame the 10% global tariff as a temporary measure under Section 122. President Trump had previously described the Supreme Court’s February ruling as “absurd, clumsy, and extremely anti-American.” However, the Court of International Trade’s Thursday ruling suggests that the judiciary remains unconvinced by the administration’s alternative legal justifications.
Immediate Impact and Mandated Refunds
The Court of International Trade did not merely strike down the policy; it issued a strict timeline for remedy. The court ordered the government to execute the judgment within five days and to refund the tariffs already paid by the importers who brought the lawsuit.
For the global business community, this ruling underscores the legal vulnerability of unilateral executive tariffs. Small and medium-sized enterprises (SMEs), which often lack the capital to absorb sudden tariff hikes, have been the primary drivers of these legal challenges. The court’s decision validates their claim that the executive branch cannot simply switch legal justifications to achieve the same result after a higher court has already ruled such actions unconstitutional.
Escalating Tensions with the European Union
Despite the domestic legal setback, the administration continues to use the threat of tariffs as a diplomatic tool. On the same day as the court ruling, President Trump issued a new warning to the European Union. He set a deadline of July 4 for the EU to fulfill commitments made in previous trade agreements.
The President warned that failure to meet this deadline would result in tariffs on EU goods, including automobiles, being raised to “higher levels.”
In a post on the social media platform Truth Social, Trump mentioned that he had a “solid call” with European Commission President Ursula von der Leyen. According to the post, the two leaders discussed trade issues and reached an agreement that Iran should not possess nuclear weapons. However, the threat of increased tariffs on European cars remains a central point of contention in the U.S.-EU relationship.
Key Legal and Economic Summary
To understand the complexity of this trade war, it is helpful to look at the two different legal paths the administration attempted to use:
- IEEPA (International Emergency Economic Powers Act): Used to declare a national emergency to justify tariffs. Struck down by the Supreme Court (6-3) on Feb 20 for violating the Constitution’s grant of taxing power to Congress. Resulted in a $166 billion refund mandate.
- Section 122 (Trade Act of 1974): Used to justify a 10% temporary global tariff based on trade deficits. Struck down by the Court of International Trade on May 7 because trade deficits do not equal a “balance of payments” crisis.
The recurring theme in both cases is the judiciary’s insistence on the separation of powers, specifically that the executive cannot unilaterally create tax law without explicit and correctly applied statutory authority from Congress.
The next critical checkpoint for global trade observers will be July 4, the deadline set by the administration for the European Union to meet its trade commitments. Whether the administration will attempt another legal pivot or proceed with targeted tariffs against the EU remains to be seen.
World Today Journal encourages readers to share this report and leave their comments below on how these shifting trade policies are affecting your business or industry.