The US Court of International Trade ruled in favour of the two businesses and Washington state that challenged the tariffs, which took effect on February 24. The ruling was 2-1, with one judge saying it was premature to grant victory to the small business plaintiffs.
The trade court declined to issue an injunction that blocks the tariffs for all importers, rejecting a request from a group of 24 states, mostly led by Democrats, saying those states did not have standing to ask for that relief.
The court ruled that most of the states that sued, with the exception of Washington, were not importers who had paid or could have paid the Section 122 tariffs. Washington submitted evidence that it paid tariffs through the University of Washington, a public research institution.
The duties will remain in place for other importers during any government appeal.
The two small businesses, toy company Basic Fun! and spice importer Burlap & Barrel, had argued the new tariffs were an attempt to sidestep a landmark US Supreme Court decision that struck down the Republican president’s 2025 tariffs imposed under the International Emergency Economic Powers Act.
In his February order, Trump invoked Section 122 of the Trade Act of 1974, which allows for duties for up to 150 days to correct serious “balance of payments deficits” or head off an imminent depreciation of the dollar.
Thursday’s court ruling found the law was not an appropriate step for the kinds of trade deficits that Trump cited in his February order.
“This decision is an important win for American companies that rely on global manufacturing to deliver safe and affordable products. Unlawful tariffs make it harder for businesses like ours to compete and grow,” said Jay Foreman, CEO of Basic Fun!
“We are encouraged by the court’s recognition that these tariffs exceeded the President’s authority. This ruling brings needed clarity and stability for companies navigating global supply chains,” he said in a statement.
The Trump administration had argued that a serious balance-of-payments deficit existed in the form of a US$1.2 trillion annual US goods trade deficit and a current account deficit of 4 percent of GDP. But some economists and trade lawyers argue the US is not on the cusp of a balance-of-payments crisis, making the new duties vulnerable to a legal challenge. (Reuters)
