On May 7, 2026, the US Court of International Trade issued a 2-1 ruling striking down the Trump administration's 10 percent global tariffs imposed under Section 122 of the Trade Act of 1974. The court determined that the administration failed to demonstrate the statutory requirement of a large and persistent balance-of-payments deficit to justify the tariffs. Notably, the administration itself had acknowledged in court proceedings that a balance-of-payments deficit is distinct from a trade deficit and that the required condition was not satisfied. The replacement tariffs were enacted after the Supreme Court's February 20, 2026 decision invalidated the earlier IEEPA-based tariffs. This marked the second consecutive judicial defeat for the administration's tariff strategy within three months. The ruling applied an injunction to the three named plaintiffs—Washington State, Burlap & Barrel, and Basic Fun!—though broader implications remain unclear pending appeals. The tariffs were set to expire in July 2026.
Following President Trump's initial use of the International Emergency Economic Powers Act in early 2025 to impose sweeping tariffs, the Supreme Court ruled on February 20, 2026, that IEEPA does not authorize tariff imposition. Within hours of that decision, Trump invoked Section 122 of the Trade Act of 1974 to impose a 10 percent ad valorem duty on nearly all imports, effective February 24, 2026, through July 24, 2026. Section 122, enacted in 1975, had never been previously used for such comprehensive tariffs and authorizes up to 150 days of duties to address large and serious balance-of-payments deficits. Multiple lawsuits challenging the Section 122 tariffs were filed immediately, including suits by 24 states and by small businesses including toy importer Basic Fun! and spice importer Burlap & Barrel.
Verified Facts
The Court of International Trade issued a 2-1 decision on May 7, 2026, striking down Trump's 10 percent global tariffs under Section 122
The court ruled that the administration failed to meet the statutory requirement for large and persistent balance-of-payments deficits
The administration itself acknowledged in court that a balance-of-payments deficit is distinct from a trade deficit
This was the second judicial defeat for Trump's tariff program in under three months following the February 20, 2026 Supreme Court IEEPA decision
The Section 122 tariffs were effective February 24, 2026 and set to expire July 24, 2026
The injunction applied directly to Washington State and two private businesses: Burlap & Barrel and Basic Fun!
One judge dissented, arguing the law allows the president more leeway on tariffs
The administration stated it would continue exploring other statutory authorities, including Section 301 investigations, to impose tariffs
The government planned to refund over $166 billion from the earlier IEEPA tariffs
Section 122 was enacted in 1975 and had never been used to impose comprehensive tariffs before this administration
Progressive and trade-skeptical analysts highlighted the court's protection of constitutional separation of powers, viewing the decision as a necessary check on executive overreach and a victory for businesses and consumers harmed by the tariff regime.
Court Rejects Trump's Second Attempt at Sweeping Tariffs, Finds Balance-of-Payments Deficit Does Not Exist
Progressive legal analysts and trade advocates welcomed the Court of International Trade's decision as a reaffirmation of constitutional checks on executive power. The ruling demonstrated that even after losing at the Supreme Court, the Trump administration attempted to circumvent constitutional restrictions by switching to a different statute, only to face another judicial defeat. Trade experts and business groups highlighted that the court correctly identified the administration's inconsistency: acknowledging in its own legal arguments that a balance-of-payments deficit did not exist while simultaneously claiming statutory authority based on that non-existent condition. The decision vindicated importers and small businesses who challenged the tariffs, with toy company Basic Fun! expressing relief at being able to fight back against what they characterized as blanket protectionist measures that harm consumers. Democratic state attorneys general and trade skeptics emphasized that the ruling reinforced Congress's exclusive constitutional authority over taxation and tariff policy, protecting the separation of powers from executive overreach. Critics noted the pattern of judicial rulings—first the Court of International Trade, then federal appeals courts, then the Supreme Court, and now trade court again—all rejecting the administration's tariff initiatives, suggesting fundamental legal problems rather than mere technical disagreements.
Key takeaway
Courts have now consistently rejected multiple iterations of the Trump administration's tariff strategy, confirming that executive overreach requires judicial correction.
Right
Conservative and administration allies characterized the ruling as judicial activism that undermined the president's legitimate statutory authority under a law passed by Congress, and argued the court misread the balance-of-payments provision.
The Trump administration and conservative allies condemned the decision as judicial overreach that undermined the president's lawfully delegated tariff authority. They argued that Congress explicitly granted tariff powers through Section 122 of the Trade Act of 1974, and the president was exercising those delegated authorities within their statutory bounds. Administration spokespersons asserted that Trump had lawfully used tariff authorities granted by Congress to address legitimate balance-of-payments concerns, noting the current account deficit and merchandise trade deficit represented serious economic imbalances. Conservative legal scholars contended that the court's narrow interpretation of Section 122 would render a statute passed by Congress essentially useless, contrary to principles of statutory interpretation. The administration signaled its confidence in ultimately prevailing on appeal and indicated it would continue pursuing tariff authorities through other statutory mechanisms, including Section 301 trade investigations. Trade policy advocates supporting the administration emphasized that tariffs serve strategic economic and national security purposes, and that judicial obstruction of congressional delegation undermines the president's ability to respond to international trade challenges. They characterized the repeated court rulings as a coordinated effort by the judicial branch to constrain executive economic power in ways that benefit foreign competitors at the expense of American workers.
Key takeaway
Congressional delegation of tariff authority has been undermined by judges imposing their own policy preferences over presidential authority explicitly granted by statute.
Straight
Federal Trade Court Strikes Down Trump's Section 122 Replacement Tariffs in 2-1 Ruling
The US Court of International Trade invalidated President Trump's 10 percent global tariffs in a 2-1 decision, finding the administration did not satisfy statutory requirements under Section 122 of the Trade Act of 1974. The court ruled that a large and persistent balance-of-payments deficit did not currently exist, which is a necessary condition to invoke the law. Notably, the administration's own legal filings had conceded that a balance-of-payments deficit differs from a trade deficit and that the required condition was not met. The replacement tariffs had been enacted after the Supreme Court struck down Trump's earlier tariffs under the International Emergency Economic Powers Act on February 20, 2026. The ruling marked the second major judicial defeat for the administration's tariff strategy within three months. One judge dissented, arguing the law permits broader presidential discretion. The injunction applied specifically to Washington State and two small businesses—toy importer Basic Fun! and spice company Burlap & Barrel—though the administration planned to seek a stay from the Court of Appeals. The tariffs were scheduled to expire in July 2026 unless extended by Congress, and the administration indicated it would pursue alternative tariff authorities.
Key takeaway
The court's decision turned on factual and statutory interpretation questions, with the administration's legal concessions proving decisive in the outcome.
The Analysis
The May 7 trade court decision represents a critical juncture in the constitutional struggle over tariff authority between the executive and legislative branches. The court's 2-1 ruling hinged on a factual question—whether a large and persistent balance-of-payments deficit exists—and a legal question about statutory interpretation. The administration's concession that such a deficit does not currently exist created an insurmountable legal problem, as the statute explicitly conditions tariff authority on this finding. The court majority reasoned that allowing the president to define what constitutes a balance-of-payments deficit would grant unlimited tariff authority in perpetuity, effectively overriding Congress's taxing power reserved by Article I. The dissenting judge's position that the law permits broader discretion reflects a different view of congressional delegation, though this perspective did not prevail. The decision's scope is notable: it applies directly to three plaintiffs but creates precedent for other importers to challenge the tariffs individually. The administration's plan to seek a stay from the Federal Circuit suggests confidence in appeal prospects, though the factual concession about the deficit's non-existence presents substantial obstacles. The ruling occurred against the backdrop of unprecedented judicial scrutiny of presidential tariff authority, with courts at multiple levels rejecting the administration's positions. The decision underscores the tension between delegated tariff authority under various statutes and constitutional limits on executive power. The administration's pivot to Section 301 investigations represents a strategic shift to different statutory authorities, suggesting awareness that Section 122 may be legally exhausted. The political dimension remains significant: tariff policy affects consumer prices, business planning, and trade relationships, making judicial invalidation consequential for economic policy beyond immediate tariff rates.
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Consequence Chain
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Why It Matters
This decision significantly constrains the Trump administration's primary tool for imposing global tariffs, striking down the replacement mechanism after the Supreme Court invalidated the IEEPA-based tariffs. The ruling threatens tariff revenue estimates and disrupts the administration's signature economic policy, requiring exploration of alternative statutory authorities. For importers and consumers, the decision provides relief from duties affecting prices across supply chains. For international trade partners, it creates uncertainty about long-term US tariff policy. For Congress, the decision reaffirms its constitutional authority over taxation and commerce. The combination of Supreme Court, Federal Circuit, and trade court rulings against the administration's tariff strategy suggests deep structural legal problems rather than technical defects, potentially limiting future tariff initiatives regardless of statutory source.