Trump dealt second blow as trade court rules 10% global tariffs illegal

(CN) — A federal court on Thursday found President Donald Trump in violation of the law for imposing a 10% global tariff on U.S. imports — another blow in the administration's efforts to impose sweeping tariffs without congressional approval.

A split three-judge panel on the U.S. Court of International Trade found Trump wrongly called upon a decades-old trade act to accomplish his tariff goals after a rare Supreme Court rebuke struck down the White House's attempts at issuing unilateral international tariffs in February.

The majority decision from Judges Mark Barnett and Claire Kelly places a hold on Trump's tariff powers, which he has heavily exercised for stated goals of protecting U.S. manufacturing and increasing economic leverage on other countries.

While the court dismissed claims from 23 of the 24 plaintiff states due to lack of legal standing, it issued a permanent injunction in favor of the Washington state and two private companies, noting the parties as "direct importers" who have suffered concrete injury in paying tax bills to the federal government.

Thursday's ruling — expected to be appealed by the Trump administration — increases the chance Trump may have to refund billions collected under sweeping tariffs implemented throughout his second term.

After February's Supreme Court decision emphasized Congress' power to implement tariffs, Trump immediately moved to utilize a largely unused provision in the Trade Act of 1974 which allows a president to impose tariffs up to 15% for a maximum of 150 days to address urgent deficits or currency crises.

The president's action was swiftly met by a second state coalition lawsuit claiming Trump was flippantly relying on an "archaic" law.

Barnett and Kelly, both Barack Obama appointees, found the president failed to meet the threshold required to use Section 122 of the Trade Act, aligning with the coalition's concerns that a section created to offset economic risks back when the U.S. dollar was backed by gold has little application in today's floating exchange rate economy.

The Trump administration previously claimed high trade deficits with other countries and the outflow of U.S. dollars backed its move to utilize the act, despite heavy skepticism and disagreement.

"This case turns on the meaning of Section 122 and whether the President asserted the existence of the conditions required by the statute in order to lawfully proclaim the import surcharges," the majority wrote, noting the president enjoys "no inherent authority" to impose tariffs.

"Once again, the courts have made clear that the president cannot unilaterally rewrite our trade laws to suit his political agenda," New York Attorney General Letitia James said in a press release. "Limitless tariffs were unlawful the first time, and changing the label did not make them any less illegal the second time."

While James, along with 22 other states in the coalition, had their claims dismissed, they largely got what they wanted as the court still dismantled the executive's attempted trade practices.

Washington state Attorney General Nick Brown, representing the only state granted an injunction, said the ruling opens the door for other parties to protest the tariffs in court.

"This is a win for both affordability and the rule of law," Brown said in a press release. "It's American consumers and businesses that have ultimately paid for the president's illegal tariff campaign. The court's order will encourage more parties to challenge this illegal executive overreach."

In a dissent, Judge Timothy C. Stanceu, a George W. Bush appointee, contends the majority jumped the gun, and should not have decided the case as a matter of law without further investigating the economic realities cited by the government, arguing a point of contention exists as to whether or not the types of deficits referenced in the decades-old trade law can exist in today's modern financial system.

"At various times in the nation's history, and in various ways, Congress has delegated to the president the power to alter the tariff treatment of goods imported into the United States," Stanceu wrote. "Section 122 is such a statute. In specific circumstances, it empowers the president to restrict imports by temporarily imposing or increasing duties or quotas."

In the previous Supreme Court case, a group of small businesses said Trump's tariffs could amount to an over $3 trillion tax increase on Americans over the next decade — noting increases would hit the poorest Americans hardest and cost thousands of jobs.

Trump, who claimed his tariff appeal was the most important Supreme Court case in history, furiously disdained Supreme Court justices following the unfavorable February ruling, calling some members of the court "fools and lapdogs for the RINOs and the radical left Democrats."

In one of three dissents, Justice Brett Kavanaugh offered Trump a roadmap for implementing tariffs regardless of the ruling, which included the Trade Act of 1974.

Jeffrey Schwag, senior counsel at the Liberty Justice Center, who represents one of the private parties granted an injunction, praised the ruling in a statement, echoing that Section 122 was passed in response to a very specific historical crisis.

"Congress authorized the president to impose tariffs where the United States experienced fundamental international payments problems and needed to respond to large and serious balance-of-payments deficits," he said. "This is not the situation here."

In an email to Courthouse News, White House Spokesman Kush Desai said "President Trump has lawfully used the tariff authorities granted to him by Congress to address our balance of payments crisis," adding the administration maintains confidence it will ultimately prevail.