Trade Court Invalidates Trump's Section 122 Import Surcharge

NEW YORK. The U.S. Court of International Trade ruled Thursday that President Donald Trump exceeded Section 122 of the Trade Act of 1974 when he imposed a temporary 10 percent surcharge on most imports, giving Washington state and two companies a narrow win in the latest fight over presidential tariff power.

The ruling did not wipe away the surcharge for every importer. The court granted relief to Washington state, Burlap and Barrel, and Basic Fun, while dismissing other state plaintiffs for lack of standing, according to Slip Opinion 26-47. That makes the decision both immediate and limited: the named plaintiffs won, and other importers now have a legal roadmap.

The case matters because Section 122 is a short term balance of payments tool, not the ordinary tariff power Congress uses for trade policy. The court said the White House relied on evidence about trade deficits and international investment flows, while the statute requires a qualifying balance of payments problem.

The Story So Far

The challenged measure was Proclamation 11012, issued February 20 and published in the Federal Register on February 25. The proclamation imposed a 10 percent ad valorem surcharge on covered imports beginning at 12:01 a.m. Eastern time on February 24 and running until July 24 unless suspended, modified, terminated, or extended by Congress.

The Federal Register text said the president acted after senior officials advised him that fundamental international payments problems existed. The proclamation cited a goods trade deficit of about $1.2 trillion in 2024 and 2025, a current account deficit near 4 percent of GDP in 2024, a negative primary income balance, and a deteriorating U.S. net international investment position.

Section 122, codified at 19 U.S.C. 2132, allows the president to proclaim a temporary import surcharge of up to 15 percent when fundamental international payments problems require special import measures to deal with large and serious U.S. balance of payments deficits, prevent imminent and significant dollar depreciation, or cooperate in correcting an international balance of payments disequilibrium. The statute generally caps the action at 150 days unless Congress extends it.

Photo: White House via Wikimedia Commons (public domain)

The administration shifted to Section 122 after an earlier Supreme Court fight over tariffs imposed under the International Emergency Economic Powers Act. In Learning Resources, Inc. v. Trump and Trump v. V.O.S. Selections, Inc., the Supreme Court held that IEEPA does not authorize the president to impose tariffs.

What's Happening Now

A three judge Court of International Trade panel split 2 to 1. Chief Judge Mark A. Barnett and Judge Claire R. Kelly formed the majority, while Judge Timothy C. Stanceu dissented, according to the court opinion.

The majority granted summary judgment for Washington state, Burlap and Barrel, and Basic Fun. It dismissed other state plaintiffs for lack of standing and denied preliminary injunction motions as moot after resolving the merits, according to the opinion.

The key sentence was direct: "Proclamation 11012 is invalid, and the tariffs imposed on Plaintiffs are unauthorized by law," the court wrote.

The court's reasoning turned on the difference between the economic evidence the president cited and the statutory trigger Congress wrote. The proclamation pointed to persistent trade deficits, primary income data, current account figures, and the U.S. net international investment position. The majority concluded that Proclamation 11012 did not identify the kind of balance of payments deficit Section 122 requires.

The Liberty Justice Center, which represented Burlap and Barrel and Basic Fun, framed the ruling as a separation of powers decision. The group said Section 122 allows tariffs only in limited circumstances and argued that the administration used ordinary trade deficit evidence to justify an emergency authority.

The Conservative View

Supporters of aggressive tariff policy argue that elected presidents need room to respond when trade deficits, supply chain dependence, and foreign industrial policy put American workers and manufacturers at a disadvantage. Proclamation 11012 made that case in national interest terms, saying special import measures can protect the economy and national security when international payments problems threaten U.S. economic stability.

The proclamation also cited specific numbers. It said the goods trade deficit reached about $1.2 trillion in 2024 and remained near that level in 2025. It said the current account deficit reached 4.0 percent of GDP in 2024 and that the U.S. net international investment position had deteriorated sharply.

For tariff supporters, those figures help explain why the administration treated the problem as more than a narrow legal dispute. The Federal Register text described the surcharge as a temporary, broad measure designed to restrict imports and address what senior officials called fundamental international payments problems.

The Progressive View

Progressive critics often object to broad import taxes because the costs can land on consumers and small businesses before they ever reach foreign producers. The court's ruling gives that critique a legal hook: Congress authorized a narrow emergency tool, and the court said the administration used it beyond the statutory limit.

Plaintiff side statements emphasized small business costs. Ethan Frisch and Ori Zohar, co founders and co CEOs of Burlap and Barrel, said the tariffs created "real challenges" for their company and for the farmers they partner with around the world, according to the Liberty Justice Center.

The ruling also puts congressional taxing power back at the center of the debate. Tariffs raise revenue from importers, and the plaintiffs argued that the Constitution gives that power to Congress unless Congress clearly delegates it.

Other Perspectives

Libertarian legal advocates treated the decision as a check on executive power. Jeffrey Schwab, senior counsel and director of litigation at the Liberty Justice Center, said the United States has "a trade deficit, not a balance of payments deficit" and argued that the president cannot impose the tariffs under Section 122.

Business importers are watching the remedy as closely as the legal theory. The court's order helped the named plaintiffs, but most importers are not direct beneficiaries unless appellate action, customs guidance, or additional lawsuits broaden the relief.

The administration had not posted an official Justice Department, USTR, White House, or Federal Circuit appeal notice found in primary source searches by early Friday. An appeal would likely decide how much weight courts give the president's economic findings under Section 122.

Economic Implications

A 10 percent ad valorem surcharge raises the landed cost of covered imports by 10 percent before exceptions and other duties are considered. Importers face the first bill. From there, they can absorb the cost through thinner margins, pass some of it to consumers, renegotiate suppliers, reduce orders, or shift sourcing.

Photo: Petty Officer 1st Class J.J. Huggins, U.S. Coast Guard, via Wikimedia Commons (public domain)

The proclamation itself shows why the business impact was broad. It applied to imported articles generally, subject to exceptions for categories such as certain critical minerals, energy products, pharmaceuticals, electronics, vehicles, aerospace products, information materials, qualifying Canada and Mexico goods, and some Central America trade agreement goods, according to the Federal Register.

The economic dispute also rests on real data. The Bureau of Economic Analysis said the U.S. current account deficit widened by $228.2 billion to $1.13 trillion in 2024, equal to 3.9 percent of current dollar GDP. BEA also said the U.S. net international investment position was negative $26.23 trillion at the end of 2024, compared with negative $19.85 trillion at the end of 2023.

Those figures support the administration's claim that the external accounts were under strain. The court's holding was narrower: the question was not whether trade deficits are economically important, but whether Proclamation 11012 matched the specific legal trigger Congress wrote into Section 122.

Photo: Don Ramey Logan via Wikimedia Commons (CC BY-SA 4.0)

By the Numbers

10 percent: The temporary surcharge imposed by Proclamation 11012 on covered imports, according to the Federal Register.

150 days: The general statutory limit for Section 122 import restrictions unless Congress extends the period, according to 19 U.S.C. 2132.

15 percent: The maximum temporary import surcharge allowed under Section 122, according to 19 U.S.C. 2132.

$1.13 trillion: The U.S. current account deficit in 2024, according to the Bureau of Economic Analysis.

Negative $26.23 trillion: The U.S. net international investment position at the end of 2024, according to BEA.

What People Are Saying

"Proclamation 11012 is invalid, and the tariffs imposed on Plaintiffs are unauthorized by law." - U.S. Court of International Trade, Slip Opinion 26-47.

"Accordingly, I impose, for a period of 150 days, a temporary import surcharge of 10 percent ad valorem, as described below, on articles imported into the United States, effective February 24, 2026." - President Donald Trump, Proclamation 11012 as published in the Federal Register.

"The United States has a trade deficit, not a balance of payments deficit, and does not have international payments problems. The President cannot impose these tariffs under Section 122." - Jeffrey Schwab, senior counsel and director of litigation at the Liberty Justice Center.

"This ruling is a major victory for small businesses like ours that depend on fair and predictable trade policy. These tariffs created real challenges for our company and for the farmers we partner with around the world." - Ethan Frisch and Ori Zohar, co founders and co CEOs of Burlap and Barrel.

"This decision is an important win for American companies that rely on global manufacturing to deliver safe and affordable products. Unlawful tariffs make it harder for businesses like ours to compete and grow." - Jay Foreman, CEO of Basic Fun.

The Big Picture

The ruling leaves two fights running at once. The legal fight is about whether Section 122 can carry a broad import surcharge after courts rejected a different tariff theory under IEEPA. The economic fight is about whether persistent U.S. external deficits justify emergency import restrictions, and who pays when government uses tariffs as the tool.

The next primary source to watch is an official appeal notice or Federal Circuit docket entry. Importers will also look for Customs and Border Protection guidance on collection, refunds, or plaintiff specific treatment.

Congress remains the other actor to watch. Section 122 gives the president temporary authority, but it also puts a clock on the action. If the administration wants broader or longer lasting tariff power, the court's ruling points the fight back toward Capitol Hill.