U.S. trade court rules against Trump’s 10% tariff, but no relief yet for most traders

The US Court of International Trade (CIT) ruled in a 2-1 decision against a 10% global tariff imposed on all US imports, holding that the legal authority inv...

What Happened

The US Court of International Trade (CIT) ruled in a 2-1 decision against a 10% global tariff imposed on all US imports, holding that the legal authority invoked — Section 122 of the Trade Act of 1974 — did not authorize the tariffs in the circumstances used.
Section 122 allows the President to impose import surcharges of up to 15% for up to 150 days specifically to address large and serious US balance-of-payments deficits; the court found that the statutory precondition (an actual balance-of-payments deficit) was not met.
The ruling provides immediate relief only to the two plaintiffs — two small companies and the state of Washington — with the tariff remaining in force against all other importers pending further legal proceedings.
This ruling follows a February 2026 Supreme Court decision (6-3) that struck down the earlier, broader set of tariffs imposed under the International Emergency Economic Powers Act (IEEPA) of 1977, which the Court held does not authorize the President to impose tariffs.
Within hours of the Supreme Court's IEEPA ruling, the administration pivoted to Section 122 as the legal basis for reimposing the global 10% tariff — the CIT ruling now challenges this fallback authority as well.

Static Topic Bridges

The International Emergency Economic Powers Act (IEEPA), 1977

IEEPA is a US federal law enacted in 1977 that grants the President broad authority to regulate international economic transactions during a declared national emergency — including blocking transactions, freezing assets, and imposing import and export controls. It was enacted as a replacement for the Trading with the Enemy Act of 1917, separating peacetime emergency powers from wartime powers. IEEPA has historically been used for financial sanctions against foreign entities and countries, not for broad tariff imposition. The February 2026 Supreme Court ruling (6-3) held that IEEPA's authorization to "regulate" imports does not extend to imposing tariffs — a significant limitation on presidential trade authority.

IEEPA enacted: 1977; paired with the National Emergencies Act (NEA) which requires formal declaration and periodic renewal of national emergencies.
The President must first declare a national emergency under the NEA before invoking IEEPA powers.
Most "Liberation Day" tariffs (announced April 2025) were imposed using IEEPA authority.
Supreme Court ruled (February 2026): IEEPA does not authorize the President to impose tariffs — a 6-3 decision limiting executive trade authority.
Post-ruling, the administration pivoted to Section 122 of the Trade Act of 1974 as the alternative legal basis.

Connection to this news: The CIT ruling on Section 122 tariffs is a direct consequence of the IEEPA ruling — having lost that authority, the administration's use of Section 122 was immediately challenged, and the court has now narrowed that basis as well.

Section 122 of the Trade Act of 1974 and Presidential Tariff Authority

Section 122 of the Trade Act of 1974 grants the President authority to impose a temporary import surcharge — up to 15% — for a maximum period of 150 days when necessary to address "large and serious United States balance-of-payments deficits" or fundamental international payments imbalances. It is a narrow, time-limited, condition-specific authority. The court's ruling turned on the statutory precondition: the US balance of payments — which measures total money flows in and out of the country across trade, services, income, and transfers — was not in a state that triggered the provision as written.

Section 122: Trade Act of 1974, Chapter 2 — Emergency Action.
Maximum surcharge: 15%; Maximum duration: 150 days.
Statutory trigger: "large and serious United States balance-of-payments deficits."
Balance of payments (BoP): a comprehensive account of a country's economic transactions with the rest of the world, comprising the current account (trade in goods/services, income, transfers), capital account, and financial account.
A trade deficit is NOT the same as a balance-of-payments deficit — trade deficit measures only goods and services; BoP encompasses investment flows, remittances, and more.
Court of International Trade: a specialized federal court with exclusive jurisdiction over civil actions involving international trade and customs law; composed of Article III judges.

Connection to this news: The court found the Section 122 authority was invoked without the required BoP deficit condition being met — a statutory interpretation question about whether a trade deficit is equivalent to a BoP deficit (it is not, legally or economically).

WTO Dispute Settlement and Trade Law Framework

The World Trade Organization (WTO) provides the multilateral legal framework governing international trade. Under WTO rules, member countries may not impose tariffs above their "bound rates" (negotiated maximum rates) without justification. Exceptions include GATT Article XXI (national security exceptions), Article XIX (safeguard measures under agreed procedures), and Anti-Dumping/Countervailing Duty provisions. Unilateral tariffs imposed outside these frameworks by major economies disrupt the rules-based trading order and are typically subject to WTO dispute resolution as well as domestic judicial review.

WTO established: 1 January 1995, successor to GATT (1947).
WTO Dispute Settlement Body (DSB): handles complaints between member nations; rulings enforced through authorized retaliation.
GATT Article XIX: "escape clause" for safeguard measures — requires injury finding and non-discriminatory application.
GATT Article XXI: national security exception — broad and largely self-judging; invoked in multiple recent US tariff actions.
The US tariffs imposed through IEEPA/Section 122 were not routed through WTO Article XIX procedures, exposing them to WTO challenge in addition to domestic legal challenge.
India's exports to the US are affected by any universal tariff baseline; India has engaged in bilateral trade negotiations with the US alongside WTO processes.

Connection to this news: The domestic judicial strikes against US tariff authority complement ongoing WTO challenges by trading partners — the convergence of domestic and international legal constraints signals limits on unilateral tariff imposition even by the world's largest economy.

Key Facts & Data

US Court of International Trade ruling: 2-1, against Section 122 tariffs; May 2026.
Tariff rate challenged: 10% universal import surcharge.
Relief scope: limited to two plaintiff companies and the state of Washington; tariff remains on all others.
Legal authority invoked: Section 122, Trade Act of 1974 (maximum 15% surcharge, 150-day limit, triggered by BoP deficits).
Supreme Court ruling on IEEPA tariffs: February 2026, 6-3 decision; held IEEPA does not authorize tariff imposition.
IEEPA: enacted 1977; previously used primarily for financial sanctions and asset freezes, not broad tariffs.
"Liberation Day" tariffs: originally announced April 2025 under IEEPA authority.
WTO Dispute Settlement Body handles inter-state trade disputes; domestic courts handle constitutional/statutory challenges.
Balance of payments = current account + capital account + financial account; trade deficit alone does not equal a BoP deficit.