Court rules Trump's 10% tariff is just as illegal as the tariff it replaced

Source: Ars Technica

Trump’s vow to impose tariffs a “different way” already has the tech industry on edge.

The day after the Supreme Court struck down a set of Donald Trump’s emergency tariffs, the president quickly imposed another, using a never‑before‑invoked provision of a decades‑old trade law to order a global 10 percent tariff on most imports. That second set of tariffs has now been deemed illegal, and there are no more emergency levers that Trump can pull to try to replace them any time soon. This leaves him without much negotiation leverage a week before he’s set to meet with China’s President Xi Jinping, who already appears to have the upper hand heading into talks.

For Trump, the U.S. Court of International Trade’s invalidation of his global tariffs puts his key trade policy—relying on tariffs to supposedly drive more manufacturing into the U.S.—at risk of being gutted. Moving forward, he won’t be able to rely on the law to collect the global tariffs.

Lucky for the administration, the court’s narrow ruling did not require a universal injunction blocking tariffs nationwide and limited refunds to only importer plaintiffs who sued. That could help avoid further chaos after Customs and Border Patrol began processing refund requests to comply with the Supreme Court ruling. It remains unclear whether the decision will prompt additional lawsuits from other importers seeking refunds or from non‑importer customers who can prove they paid higher prices linked to the tariffs.

Trump will most likely appeal the ruling. In the meantime, the decision puts immediate pressure on his administration to quickly conclude investigations into tariff regimes that may be available under other statutes—an effort analysts expect could take weeks, if not months.

On Friday, Trump “criticized the judges” at the international trade court, while telling reporters that he would pursue his tariff agenda under other authorities, The New York Times reported.

“So, we always do it a different way.
We get one ruling, and we do it a different way.”

Why the Global Tariff Is Illegal

In a 2‑1 ruling, Chief Judge Mark A. Barnett and Judge Claire R. Kelly held that the tariffs President Trump imposed under Section 122 of the Trade Act of 1974 were illegal.

The Administration’s Argument

Trump argued that the law permitted him “to impose temporary surcharges up to 15 percent” to combat:

• “Fundamental international payments problems,” and
• “Large and serious United States balance‑of‑payments deficits.”

He indicated that, if the court allowed the temporary tariffs, he would have imposed even steeper duties under the same authority. A key part of his argument was the claim that he alone could decide what constituted a “balance‑of‑payments deficit,” a phrase his advisors described as “malleable.”

Importers’ Counter‑Argument

The importers who sued successfully contended that Trump unlawfully redefined the term. They argued that:

• The original statutory language was drafted when the U.S. dollar was pegged to gold.
• Under a floating‑exchange‑rate system—the regime the United States has used since abandoning the gold standard—“large and serious balance‑of‑payments deficits” cannot arise.

Consequently, they maintained that the President lacked authority to invoke Section 122.

Court’s Reasoning

The majority opinion concluded that Congress could not have intended to grant Trump the expansive authority he asserted. As the court 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.”

Footnote Clarification

In a footnote, the majority noted that Trump also argued the phrase “fundamental international payments problems” should not constrain him at all. The judges rejected this view, stating:

“The court cannot accept Defendants’ interpretation that disclaims the existence of any meaningful intelligible principle in either ‘fundamental international payments problems’ or ‘balance‑of‑payment deficits.’”

In short, words have meanings, and the statute must be read according to its ordinary sense.

Dissent

Judge Timothy C. Stanceu authored the dissent. He did not defend the tariffs per se; rather, he disagreed with the majority’s interpretation and the timing of the decision. He argued that the parties should have been given an opportunity to respond to the court’s interpretation before an opinion was issued.

“We are not experts in international macro‑economics matters and should hesitate to question whether it was reasonable for the President to rely on calculations that the majority deemed in line with legislative history, rather than a calculation of his own that may have been acceptable,” — Stanceu, dissenting opinion

Injunction

The majority found no factual disputes and determined that the plaintiffs demonstrated that harms from the unlawful tariffs were imminent and ongoing. Accordingly, the court granted a permanent injunction once it resolved the statutory interpretation.

Trump’s attempt to block the injunction on the ground that it would intrude on his conduct of foreign affairs was deemed unpersuasive. The judges concluded that:

“Enjoining unlawful conduct is in the public interest.”

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Bottom line: The court held that Section 122 does not give the President unchecked power to impose tariffs based on a self‑determined definition of balance‑of‑payments deficits, rendering Trump’s tariffs illegal.

What’s Trump’s Next Move?

What happens next is anyone’s guess, but don’t expect Trump to give up on tariffs.

After the Supreme Court required refunds on Trump’s so‑called reciprocal tariffs under the International Emergency Economic Powers Act (IEEPA), both the U.S. government and U.S. businesses faced lawsuits not just from importers, but also from companies dealing with importers and those companies’ customers.

Trump has made it clear that he is not happy about court‑ordered refunds, which some businesses should start receiving next week, Reuters reported. Last month, he cheered news that Apple and Amazon had yet to request refunds, which CNBC reported was due to fears of “offending” Trump. Deeming that response a sign that those companies understood the way Trump operates, he said he would “remember” any companies that “honor” him by letting the U.S. keep the unlawfully collected IEEPA tariffs.

Ars could not reach Apple or Amazon to clarify their positions on IEEPA tariff refunds.

Most likely, Trump is relieved that the international‑trade court did not require a similar universal injunction or widespread refunds on Section 122 tariffs. Notably, the president griped that the Supreme Court’s opinion omitted a line that said, “you don’t have to pay back tariffs that have already been received,” CNBC reported, suggesting that part of his tariff strategy was to seize as many duties as possible and hope the courts would not order refunds.

Regardless of the outcome for Section 122 refunds, Trump will probably prioritize concluding two trade investigations under Section 301 now that future Section 122 tariffs are unavailable, the New York Times reported. The United States Trade Representative (USTR) is currently holding stakeholder hearings on those investigations. The last hearing is scheduled for Friday, and new tariffs could be announced as soon as July.

Advocating for narrow tariffs are groups representing tech stakeholders, including the trade group Consumer Technology Association (CTA) and the think tank Information Technology and Innovation Foundation (ITIF), which Apple “supports,” Politico reported. They have urged USTR to focus narrowly on China—rather than all U.S. trading partners—when imposing Section 301 tariffs. Otherwise, Trump’s goal of forcing more manufacturing into the U.S. will face impediments, as tech companies would again be hit with high costs and supply‑chain uncertainties.

“Broad, economy‑wide tariffs raise costs for U.S. manufacturers, retailers and consumers while delivering limited enforcement benefits,” CTA’s vice‑president of international trade, Ed Brzytwa, testified.
“Restricting access or increasing the cost of inputs that aren’t manufactured in sufficient quantities in the United States—or aren’t made here at all—can increase costs, reduce competitiveness and discourage investment in U.S. manufacturing.”

Author

Ashley Belanger – senior policy reporter for Ars Technica, tracking the social impacts of emerging policies and new technologies. Based in Chicago, she has 20 years of journalism experience.