U.S. Court Rehears Trump Tariffs; 10% Global Levy Faces Legality Test

The U.S. Court of International Trade is conducting a judicial review of the Trump administration's latest round of tariff policies, with the core dispute directly addressing a fundamental question: can trade deficits constitute a legal basis for imposing tariffs? According to Xinhua News Agency, in February of this year, the Supreme Court, in a 6-to-3 decision, overturned tariffs for 2025 imposed by Trump under the International Emergency Economic Powers Act (IEEPA). The administration subsequently turned to Section 122 of the Trade Act of 1974, announcing a new round of 10% tariffs within hours of the Supreme Court's ruling. According to the latest news from Reuters and The New York Times, a panel of three judges from the U.S. Court of International Trade held a three-hour hearing and debate on Friday (April 10th) regarding the 10% universal import tariff order signed by Trump in February. The judges raised sharp questions about the legal basis cited by the administration, implying that trade deficits are not the same as the "balance of payments deficit" stipulated by law, and that the administration's legal arguments have significant flaws. The lawsuit was jointly filed by 24 states, primarily governed by Democrats, and several small businesses. If the government loses, not only will these tariffs be invalidated, but the federal government may also be compelled to refund the taxes already collected. This lawsuit represents the latest legal challenge to Trump's tariff policies. Trade lawyer Timothy C. Brightbill stated before the hearing that he expects the court to be "skeptical" of Trump's authority to impose tariffs on such a broad scale. Legal Basis in Doubt: Trade Deficit ≠ Balance of Payments Deficit The core legal dispute in this lawsuit lies in whether Section 122 of the Trade Act of 1974, cited by Trump, is applicable to the current situation. This provision allows the president to impose tariffs of up to 15% on imported goods for no more than 150 days, but its application is strictly limited to addressing a "large and serious U.S. balance of payments deficit" and "fundamental international payment problems." In his February executive order, Trump primarily cited the U.S. trade deficit, stating it could "endanger the ability of the United States to finance expenditures, erode investor confidence, and disrupt financial markets." However, the plaintiffs—including state governments like Oregon and small businesses—explicitly pointed out that trade deficits and "balance of payments deficits" are two distinct economic concepts, and the latter is fundamentally impossible to exist in the current economic environment. Senior Judge Timothy Stanceu, appointed by President George W. Bush, directly highlighted this contradiction during the hearing: "We are not quite sure how to apply a 1974 concept to 2026, but we do know that a 'trade deficit' is not the same thing as a 'balance of payments deficit.'" Justice Department lawyer Brett A. Shumate insisted that the U.S. trade deficit is a component of the broader "balance of payments" deficit, constituting a "large and serious" international payment problem, and that this determination falls under the president's "discretionary power," which the court cannot review. However, this argument was met with a barrage of questions from the judges almost from the outset. Can Laws from the Gold Standard Era Apply Today? According to reports, the plaintiffs further argued that the economic risks addressed by Section 122 are rooted in a long-gone historical context—the Bretton Woods system of the 1960s and 1970s, when the U.S. dollar was pegged to gold. At that time, foreign holders could exchange dollars for gold reserves stored in Fort Knox, Kentucky, posing a realistic risk of massive dollar-to-gold redemptions. Oregon lawyer Brian Marshall pointed out that the U.S. terminated the international convertibility of the dollar to gold in 1971, and foreign holders no longer face the possibility of triggering a "gold run." The economic risk scenarios envisioned by Section 122 no longer exist. He argued that judges should interpret presidential authority based on its understanding at the time of the 1970s legislation. Jeffrey Schwab, Legal Director at the Liberty Justice Center, representing small businesses, also emphasized that Congress at the time "intended to address a very specific problem," namely the risks associated with the gold standard, whereas Trump's interpretation is "very, very broad." Stan Veuger, a senior fellow at the American Enterprise Institute, along with dozens of other experts, submitted an amicus curiae brief to the Court of International Trade in support of the plaintiffs. He stated that the Trump administration's strategy was to "acquire the broadest possible legal tools." Uncertainty Over Ruling Timeline, New Tariff System Already Underway The outcome of this case has significant implications. According to The New York Times, after the Supreme Court's February ruling overturned the IEEPA tariffs, a wave of companies began seeking refunds for approximately $166 billion in illegal tariffs already collected by the government. If the current 10% tariffs are also ruled unlawful, the government will face a new wave of refund pressures. The plaintiffs also expressed vigilance regarding Trump's potential strategies to circumvent legal restrictions. Marshall warned that if the government continuously invokes different legal provisions, keeping tariffs perpetually in effect, it could create a de facto permanent tariff mechanism—"If we are facing a series of sequential tariffs, and there are always tariffs in place, that would be a problem." White House spokesperson Kush Desai stated in a release that the president was "lawfully exercising his constitutional executive authority" and that the administration would "vigorously defend the legality of the president's actions." The panel did not provide a timeline for their ruling at the conclusion of the hearing. Trade lawyer Brightbill anticipates that the legal process could take several months for a full ruling, by which time the Trump administration will have already begun advancing alternative tariff plans. According to The New York Times, Trump initially viewed this broad tariff as a transitional arrangement to buy time for the administration to investigate the trade practices of various countries under Section 301 of the same Trade Act of 1974, and subsequently impose more targeted tariffs. Veuger noted that tariffs imposed under Section 301 and other authorizations are "more difficult to implement so broadly and so quickly," but the administration has a "long track record" of invoking these provisions, and they are "relatively less susceptible to legal challenge."