The US Court of International Trade struck down the Trump administration's 10% global tariffs after declaring the reciprocal tariff illegal. The Court ruling stated that the measures exceeded powers granted by Congress under Section 122 of the Trade Act of 1974.
In a 2-1 decision delivered on May 7, the court held that the tariffs were invalid and unauthorised by law. It emphasised that Section 122 was designed only to address balance-of-payments emergencies rather than serve as a tool for reducing trade deficits through sweeping tariff actions.
The Trump administration initially introduced reciprocal tariffs on several countries, with rates as high as 50% for some, including India. After the Supreme Court struck down the Trump tariff in February, the administarion introduced the 10% across-the-board tariffs on February 20.
Judges noted that the legal basis for invoking Section 122 was weak, particularly because the US has operated under a free-floating dollar system since 1973, reducing the relevance of balance-of-payments concerns envisioned under the statute.
A president can only use Section 122 to impose tariffs up to 15% across all imports without congressional approval under certain criteria. The court noted that the administration’s current argument for the tariffs is insufficient. However, the decision currently applies only to the parties that filed the case—the state of Washington, spice importer Burlap & Barrel, and toy maker Basic Fun! The tariffs will continue for other importers while the US government appeals the ruling. The court chose not to block the tariffs nationwide at this stage. As the Court has stuck down both tariff regimes, the US tariff structure will be reverting closer to pre-Trump most-favoured-nation (MFN) rates for affected parties.
“The continuing uncertainty around U.S. tariff policy, with major Trump-era tariffs repeatedly struck down by courts, makes any long-term trade commitments by India difficult to justify. At present, the U.S. is also not prepared to reduce its standard Most-Favoured-Nation (MFN) tariffs, while expecting India to lower or eliminate it MFN duties across most sectors,” stated the think tank, Global Trade Research Initiative (GTRI).