A federal trade court on Friday wrestled with the legality of a 10 percent global tariff imposed by President Donald Trump in February after the Supreme Court struck down sweeping tariffs imposed on dozens of countries last year.
A three-judge panel of the US Court of International Trade wondered whether Trump had appropriately invoked the 1974 law to justify the new tariffs, which may remain in effect for only 150 days.
The law allows the President to temporarily impose a global tariff of up to 15 percent to address “large and serious” balance of payments deficits.
Although Trump cited persistent trade deficits with foreign countries as grounds for reimposing the tariffs, lawyers representing small businesses and Democratic-led states say the Nixon-era law was meant to address narrow concerns about currency exchange and the strength of the dollar.
The justices gave no indication how soon they plan to rule on the duties, which are set to expire in July unless Congress acts to extend them. The White House has made clear that it intends to use the duties as a bridge until it can impose tariffs under different legal authorities that allow permanent tariffs.
During the nearly three-hour hearing, the panel grappled with the ambiguities of the law and the evolution of the international financial system, from a time when the U.S. had significant trade surpluses — and U.S. citizens were only recently allowed to hold gold — to today’s stubborn trade deficit, which has fueled Trump’s pressure for sweeping tariffs.
“We’re not sure how to turn 1974 into 2026,” Judge Timothy Stansu said.
Despite its complexities, the dispute looms large over Trump’s economic agenda, which had already suffered a serious blow when the Supreme Court rejected his attempt to use emergency authority to impose broad-based tariffs on America’s trading partners without congressional approval.
Trump was alarmed by this decision and attacked the Supreme Court for rejecting him, claiming that the Court’s decision gave him an even stronger hand to use other mechanisms to impose alternative tariffs at even higher levels. They include new 150-day tariffs imposed worldwide, subject to exceptions for certain categories of goods. (Trump also promised to increase tariffs to 15 percent but has not done so.)
Lawyers opposing Trump’s February tariffs argued Friday that the statute, Section 122 of the Trade Act of 1974, is essentially obsolete.
Brian Marshall of the Oregon Attorney General’s Office said, “We believe that the use of the term ‘balance of payments’ as it was understood in the 1970s…does not exist today.
But a Justice Department lawyer argued that Trump still has the authority to use the law because the trade deficit is a component of a “large and serious … balance of payments” problem that gives the president the go-ahead to impose tariffs.
DOJ attorney Brett Shumate said, “The trade deficit was as big a driver of the balance of payments deficit in 1974 as it is today.” “We are no longer on the gold standard. We don’t have a fixed currency, but we may still have balance of payments problems.”
However, Marshall said that the law was intended to impose a type of foreign exchange emergency, which no one claims today. “This is really about the monetary crisis,” he said.
Confusion about the meaning and application of the statute dominated the hearing to such an extent that, in its conclusion, one of the lawyers opposing the tariffs urged the judges to rely on a legal principle known as the “major question doctrine” to eliminate the duties. Under that doctrine, the Supreme Court sometimes rules against government actions with large economic impacts if Congress has not explicitly authorized them.
Jeffrey Schwab of the Liberty Justice Center said, “Here, we have an enormous amount of power allegedly given to the president that clearly reflects enormous economic and political significance, and in a situation where we have an old statute that has never been used in this way by a president before.”
“So, the ‘key question theory’ would say, ‘Okay, this requires a clear statement from Congress.’ And I think what we’ve concluded from our three hours here is that there is no clear indication that the president can use Section 122 as he has done, Schwab said.
