U.S. appeals court halts order declaring Trump’s global 10% tariff illegal

The US Court of Appeals for the Federal Circuit on May 12, 2026 issued an administrative stay on an order by the US Court of International Trade (CIT) that h...

What Happened

The US Court of Appeals for the Federal Circuit on May 12, 2026 issued an administrative stay on an order by the US Court of International Trade (CIT) that had declared the administration's global 10 percent tariff illegal.
The CIT had ruled that the tariffs — imposed under Section 122 of the Trade Act of 1974 — were unlawful because the administration had not demonstrated "large and serious" balance-of-payments deficits as Congress intended when enacting the statute in 1974.
The appeals court set a briefing schedule for both sides and effectively reinstated the 10 percent tariff while the case proceeds.
This tariff followed the Supreme Court's February 2026 ruling in Learning Resources, Inc. v. Trump, which struck down the earlier tariffs imposed under the International Emergency Economic Powers Act (IEEPA), finding that IEEPA does not authorise the President to impose tariffs.
The administration responded to the IEEPA ruling by pivoting to Section 122 of the Trade Act, 1974, as an alternative legal basis for the global tariff.

Static Topic Bridges

International Emergency Economic Powers Act (IEEPA), 1977

The International Emergency Economic Powers Act (IEEPA) was enacted by the US Congress on December 28, 1977. It grants the President broad authority to regulate international economic transactions — including trade and financial flows — following a declaration of national emergency under the National Emergencies Act (NEA) of 1976. IEEPA was enacted to reform and restrict the broader powers previously granted under the Trading with the Enemy Act of 1917.

Enacted: December 28, 1977, during President Jimmy Carter's administration
Trigger: President must declare a national emergency arising from "unusual and extraordinary threat" from outside the United States
Powers granted: President may regulate imports, exports, financial transactions, and foreign asset transfers
Tariff authority: Debated — the US Supreme Court ruled in February 2026 (Learning Resources, Inc. v. Trump) that IEEPA does NOT authorise the President to impose tariffs
IEEPA has been used for economic sanctions (Iran, Russia, North Korea) — those uses were not affected by the Supreme Court ruling

Connection to this news: The administration's original legal basis for the global tariff was IEEPA. The Supreme Court invalidated that basis in February 2026, forcing the administration to find alternative statutory authority — leading to the Section 122 tariff now under challenge.

Section 122 of the Trade Act of 1974

Section 122 (codified at 19 USC 2132) of the Trade Act of 1974 grants the President authority to impose temporary import surcharges of up to 15 percent ad valorem when "fundamental international payments problems" exist, specifically when: (1) large and serious US balance-of-payments deficits require action; (2) an imminent and significant depreciation of the dollar in foreign exchange markets threatens; or (3) international cooperation on balance-of-payments disequilibrium is required. Any such surcharge is time-limited to 150 days.

Maximum surcharge: 15 percent ad valorem
Duration limit: 150 days (requires Congressional reauthorisation beyond that)
Legislative history: modelled on President Nixon's 10 percent surcharge imposed for 127 days in 1971 during the collapse of the Bretton Woods system
Balance-of-payments measures Congress recognised in 1974: the "basic balance," "liquidity," and "official settlements" measures — not the current account balance or goods trade deficit used by the administration
The CIT found that the administration's reliance on current account and goods trade deficits did not meet the statutory standard as Congress understood it in 1974

Connection to this news: Section 122 is the statutory basis for the 10 percent global tariff that the appeals court has now temporarily reinstated. Whether it is a constitutionally and statutorily valid basis for the tariff will be determined through the appeals process.

US Court of International Trade (CIT) and Federal Circuit

The US Court of International Trade (CIT) is a specialised federal court with exclusive jurisdiction over civil actions arising from international trade and customs laws. It sits in New York. Appeals from the CIT go to the US Court of Appeals for the Federal Circuit, which has exclusive appellate jurisdiction over trade cases. Final appeal lies with the US Supreme Court.

CIT: established under Article III of the US Constitution; jurisdiction over tariff, trade remedy, and customs matters
Federal Circuit: hears appeals from CIT, the US Court of Federal Claims, and certain agency decisions (patents, government contracts)
An "administrative stay" issued by an appeals court temporarily pauses the lower court's order while the appeals court considers the merits — it does not constitute a ruling on the merits

Connection to this news: The Federal Circuit's administrative stay means the 10 percent tariff is back in effect while the litigation continues. The outcome has significant implications for global trade flows and specifically for India, which faces these tariffs on its exports to the US.

Implications for India–US Trade

The US is India's largest merchandise export destination. India's goods exports to the US in 2024-25 were approximately USD 77 billion. A 10 percent across-the-board tariff raises the cost of Indian exports in the US market, affecting sectors like pharmaceuticals, textiles, engineering goods, gems and jewellery, and IT hardware.

India–US bilateral trade (goods + services) exceeded USD 200 billion in FY2025
Indian goods most affected by a 10% tariff: pharmaceuticals, textiles & apparel, gems & jewellery, engineering goods, chemicals
India has been negotiating a bilateral trade agreement with the US to seek tariff exemptions or reductions
WTO dispute settlement: India could potentially challenge the tariff at the WTO under GATT's MFN obligation, but the US has blocked appointments to the WTO Appellate Body, limiting effective multilateral recourse

Connection to this news: The reinstatement of the 10 percent global tariff by the appeals court keeps the trade uncertainty alive, directly affecting the competitiveness of Indian exports in the US market.

Key Facts & Data

Global tariff rate under challenge: 10 percent ad valorem
Statutory basis: Section 122, Trade Act of 1974 (19 USC 2132)
Maximum permissible surcharge under Section 122: 15 percent for up to 150 days
IEEPA enacted: December 28, 1977
Supreme Court ruling striking down IEEPA tariffs: February 2026 — Learning Resources, Inc. v. Trump
Appellate court: US Court of Appeals for the Federal Circuit
Trial court: US Court of International Trade (CIT)
India's goods exports to the US (FY2024-25): approximately USD 77 billion
Nixon's Section 122-style surcharge precedent: 10 percent for 127 days in 1971 (Bretton Woods collapse)