US Trade Court Raises Fresh Doubts Over Legal Basis of Trump’s Sweeping 10 Per Cent Global Tariffs
Judges question whether trade deficits qualify as ‘balance of payments’ crises under 1974 law as states and businesses challenge broad import duties.
Staff WriterApr 14, 2026, 10:12 AMA panel of trade court judges has questioned the legality of President Donald Trump’s 10 per cent tariff on most imports, suggesting that a large trade deficit may not be sufficient grounds to impose broad-based duties.
The U.S. Court of International Trade heard arguments on Friday in lawsuits brought by 24 mostly Democrat-led states, along with small businesses, challenging the tariffs that came into effect on 24 February.
The states argue that Trump’s move was an attempt to sidestep a landmark U.S. Supreme Court ruling issued four days earlier, which struck down the Republican president’s 2025 tariffs imposed under the International Emergency Economic Powers Act (IEEPA).
Those earlier tariffs disrupted corporate trade throughout much of 2025, dampening business investment as billions of dollars in levies flowed into federal coffers, before being overturned by the nation’s highest court in February.
Even with those tariffs — many of which exceeded 10 per cent — the trade deficit stood at $901.5 billion in 2025, little changed from the previous year.
In his February order, Trump invoked Section 122 of the Trade Act of 1974, which permits duties for up to 150 days to address serious “balance of payments deficits” or to avert an imminent depreciation of the dollar.
Opposing states and businesses argue that the provision was intended only for short-term monetary emergencies, and that routine trade deficits do not meet the economic definition of balance-of-payments deficits.
Tariffs have become a central pillar of Trump’s second-term foreign policy, with the president asserting broad authority to impose them without Congressional approval. No previous U.S. president has used Section 122 or the IEEPA to introduce tariffs.
During three hours of arguments, the three-judge panel examined how “balance of payments deficits” should be interpreted.
Judge Timothy Stanceu questioned the administration’s position that a trade deficit — which arises when a country imports more goods than it exports — could alone justify invoking the 1974 law.
The government argued that the U.S. trade deficit contributes to a wider balance-of-payments deficit and creates a significant international payments concern for the country.
Lawyers representing the states and businesses contended that the tariffs rely on outdated economic measures designed to protect the US dollar during the 1960s and early 1970s, when it was convertible into gold reserves. The United States ended that convertibility in 1971.
They further urged the court to block the 10 per cent tariffs outright, rather than allow them to lapse after 150 days, warning that successive use of legal provisions could effectively make the duties permanent.
The court did not indicate when it would deliver its ruling.
The latest lawsuits do not challenge other Trump tariffs introduced under more conventional legal authority, including recent duties on steel, aluminium and copper imports.
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