A new, high-stakes legal battle has erupted over the Trump administration's latest attempt to impose broad global tariffs.
The conflict began after the Supreme Court ruled in February 2026 that the administration's previous tariffs, enacted under the International Emergency Economic Powers Act (IEEPA), were unlawful. The court found that the IEEPA does not grant the president broad authority to set tariffs, a power that largely resides with Congress. This decision invalidated the administration's entire 2025 tariff structure and prompted companies to seek refunds on billions of dollars in duties paid.
In response, the administration immediately pivoted to a different, more obscure law: Section 122 of the Trade Act of 1974. This provision allows the president to impose a temporary import surcharge of up to 15% for a maximum of 150 days. However, its use is strictly limited to addressing a "fundamental international payments problem." The White House invoked this authority to impose a new 10-15% global surcharge, framing it as a necessary emergency measure.
This is where the new lawsuit comes in. A coalition of U.S. states argues that the administration's use of Section 122 is illegal for a simple reason: the required economic crisis doesn't exist. First, they point to official data from the Bureau of Economic Analysis (BEA), which shows the U.S. current account deficit has been narrowing, directly contradicting the claim of a balance-of-payments (BOP) emergency. Second, they argue the action violates administrative law because the government's own prior interpretations have stated Section 122 does not cover trade deficits.
This legal challenge is further bolstered by the current economic climate. With headline inflation slowing to 2.4% and import prices remaining stable, the administration's narrative of an economic emergency requiring immediate, sweeping tariffs appears weaker. If the states succeed in obtaining a preliminary injunction, it could freeze the new tariffs long before their 150-day expiration, reshaping the outlook for inflation, corporate costs, and U.S. trade relations.
- Glossary
- International Emergency Economic Powers Act (IEEPA): A U.S. federal law granting the President authority to regulate international commerce after declaring a national emergency. The Supreme Court recently ruled it cannot be used for broad tariff-setting.
- Section 122 of the Trade Act of 1974: A rarely used provision that allows the President to impose a temporary import surcharge (up to 15% for 150 days) to address a serious balance-of-payments deficit.
- Balance of Payments (BOP): A record of all economic transactions between the residents of a country and the rest of the world. A "fundamental problem" or large deficit is the required trigger for Section 122.