A US court has ruled against Trump’s new 10% tariffs. Why this may not be good news

In a 2-1 ruling on May 7, 2026, the US Court of International Trade struck down the Trump administration's 10% blanket import tariff imposed under Section 12...

What Happened

In a 2-1 ruling on May 7, 2026, the US Court of International Trade struck down the Trump administration's 10% blanket import tariff imposed under Section 122 of the Trade Act of 1974, calling the tariffs "unlawful" and finding that they caused "economic harm" to plaintiffs.
The court found that Section 122 requires a "large and serious" US balance-of-payments deficit as the legal trigger, but the White House proclamation had cited only the US trade deficit and current account deficit — two narrower economic concepts that do not meet that statutory threshold.
The court issued a permanent injunction against the tariffs, but only for the three named importer plaintiffs: Burlap and Barrel, Basic Fun, and the State of Washington.
This ruling follows an earlier Supreme Court decision (6-3) earlier in 2026 that struck down the administration's broader IEEPA-based tariffs, ruling that the International Emergency Economic Powers Act does not grant the president tariff-imposing authority.
Facing the loss of IEEPA, the administration had on February 20, 2026 pivoted to Section 122 — invoking it for the first time in more than 50 years since the provision was enacted — to continue its tariff program.
The administration is expected to appeal the ruling, and economists note the ruling does not automatically benefit India or other trading partners because the injunction covers only specific plaintiffs, not all importers.

Static Topic Bridges

Section 122 of the Trade Act of 1974

Section 122 is a US statutory provision that grants the president limited, temporary authority to impose import surcharges or quotas when the country faces a "large and serious" balance-of-payments deficit. It was originally modelled on President Nixon's 10% surcharge imposed under executive power in 1971.

Maximum surcharge permitted: 15% for up to 150 days; any extension requires an act of Congress.
The tariff must apply globally — it cannot be country-specific, requiring "broad and uniform application."
The trigger condition is a balance-of-payments deficit (total international payments flows), which is distinct from a trade deficit (goods only) or current account deficit (goods + services + transfers).
The provision lay dormant for over 50 years before its first use in 2026.

Connection to this news: The court found the administration misidentified the qualifying economic condition, using the trade deficit and current account deficit rather than the broader balance-of-payments deficit that Section 122 actually requires — a technical but legally fatal error.

IEEPA and the Architecture of US Presidential Tariff Authority

The International Emergency Economic Powers Act (1977) grants the US president broad authority to regulate international commerce in response to declared national emergencies. The administration used IEEPA to justify sweeping "reciprocal tariffs" on nearly all trading partners, but the Supreme Court ruled in early 2026 that imposing tariffs is not within IEEPA's scope.

US tariff authority is constitutionally vested in Congress (Article I, Section 8); presidents exercise tariff powers only via explicit congressional delegations.
Major statutory delegations include: Section 232 (national security), Section 301 (unfair trade practices), Section 201 (safeguards), Section 122 (balance of payments), and the now-restricted IEEPA.
The 2026 Supreme Court ruling significantly curtailed executive discretion in trade policy, shifting leverage back toward Congress.

Connection to this news: The sequential legal defeats — first IEEPA, now Section 122 — leave the administration with a narrowing toolkit for maintaining broad-based tariff pressure, potentially forcing either targeted sectoral tariffs (Section 232/301) or congressional action.

India's Trade Exposure to US Tariff Policy

India is one of the largest emerging market exporters to the United States, with key export sectors including pharmaceuticals, IT services, textiles, gems and jewellery, and engineering goods.

India-US bilateral goods trade was approximately $120 billion in 2024–25.
A blanket 10% US import tariff would have raised costs for Indian exporters across all goods categories, disproportionately hitting labour-intensive sectors.
India and the US were in ongoing negotiations for a bilateral trade deal, with the tariff environment creating both pressure and opportunity for deal-making.
Indian pharmaceutical exports to the US — one of the largest bilateral flows — were closely watched given the US's stated interest in reducing drug price dependence on foreign suppliers.

Connection to this news: The court ruling temporarily relieves pressure on Indian exporters benefiting from the enjoined tariffs, but since the injunction is plaintiff-specific rather than universal, the broader tariff landscape for Indian goods depends on the administration's appeal strategy and any new legislative or executive tariff actions.

Key Facts & Data

Ruling date: May 7, 2026 — US Court of International Trade, 2-1 majority.
Legal provision at issue: Section 122, Trade Act of 1974.
Tariff struck down: 10% blanket import surcharge on most US imports.
Supreme Court IEEPA ruling: 6-3, earlier in 2026 — IEEPA does not authorize tariff imposition.
Section 122 tariff ceiling: 15% for up to 150 days without congressional approval.
Section 122 trigger requirement: "large and serious" balance-of-payments deficit — not met, per the court.
First use of Section 122: February 20, 2026 — more than 50 years after its 1974 enactment.
Named plaintiffs: Burlap and Barrel, Basic Fun, and the State of Washington.