The Court of International Trade (CIT) has dealt another blow to President Donald Trump’s tariff regime, ruling that his latest 10 percent tariffs, like the “reciprocal” duties that came before them, are unlawful.
Trump levied the tariffs on Feb. 24, days after his International Emergency Economic Powers Act (IEEPA) duties were struck down by the Supreme Court. Imposed under Section 122 of the Trade Act of 1974, the administration justified the duties by saying that America’s prolific trade imbalance with global trade partners amounts to a balance-of-payments issue, which the law addresses.
The CIT did not agree, siding with small businesses Burlap and Barrel, a New York spice importer, and Basic Fun!, a Florida-based toy company, which collectively filed suit under Burlap and Barrel, Inc. v. Trump. The panel of three judges ruled 2-1. Oral arguments in the case were delivered on April 10.
The Liberty Justice Center, which represented the plaintiffs in the lawsuit (and represented the IEEPA plaintiffs in V.O.S. Selections, Inc. v. Trump), argued successfully that while Section 122 authorizes the president to impose tariffs, the power is constrained to specific circumstances that weren’t met in this instance.
“Congress authorized the President to impose tariffs where the United States experienced fundamental international payments problems and needed to respond to large and serious balance-of-payments deficits,” said Jeffrey Schwab, senior counsel and director of litigation at the Liberty Justice Center on Thursday.
“That is not the situation here,” he added. “The United States has a trade deficit, not a balance-of-payments deficit, and does not have international payments problems. The President cannot impose these tariffs under Section 122.”
Burlap and Barrel co-CEOs Ethan Frisch and Ori Zohar called the ruling a “major victory for small businesses” that need “fair and predictable trade policy” to prosper. “These tariffs created real challenges for our company and for the farmers we partner with around the world,” they said.
“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,” added Basic Fun! CEO Jay Foreman. “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.”
These small businesses may not be out of the woods yet when it comes to additional duties, however.
The Section 122 tariffs were due to expire on July 26, and with that date in mind, the administration turned to another provision of the Trade Act of 1974, Section 301. Two investigations into forced labor and industrial excess capacity encompass dozens of U.S. trading partners, and could lead to hefty tariffs well beyond the 10 percent imposed under Section 122. The Office of the U.S. Trade Representative is conducting the investigations on an expedited timeline at the administration’s behest, and held hearings this week and last with stakeholders impacted by the probes.
Facts Only
* The Court of International Trade (CIT) ruled that the latest 10 percent tariffs imposed by President Trump are unlawful.
* The tariffs were imposed on February 24.
* The administration justified the duties under Section 122 of the Trade Act of 1974, linking them to a balance-of-payments issue.
* The CIT ruled against the administration, siding with small businesses Burlap and Barrel and Basic Fun!.
* The ruling was delivered by a panel of three judges.
* The Liberty Justice Center successfully argued that Section 122 authority is constrained by specific circumstances not met in this instance.
* Plaintiffs argued that the U.S. has a trade deficit, not a balance-of-payments deficit, and lacks international payments problems.
* The ruling provides clarity regarding the President's authority under Section 122.
* The administration is pursuing investigations under Section 301 concerning forced labor and industrial excess capacity.
* The Office of the U.S. Trade Representative is conducting these investigations.
Executive Summary
Full Take
The conflict between executive authority and established trade law highlights a tension between asserted political power and structural legal constraints. The administration sought to use Section 122 to impose tariffs based on perceived international payment problems, but the court found that the necessary conditions for this power were not met. This suggests that the rhetoric of necessity, while politically potent, does not automatically translate into legal justification under the existing statute. The victory for small businesses, Burlap and Barrel and Basic Fun!, reinforces the idea that economic protection and operational stability require predictable, lawful policies rather than broad, discretionary action.
The unfolding context, with the administration immediately pursuing Section 301 investigations, suggests a pattern where legal challenges may be viewed not as definitive legal boundaries, but as temporary obstacles to ongoing political objectives. The shift from focusing on the immediate legality of the tariffs to escalating investigations into trade partners implies a strategic move to redefine the basis for imposing duties, potentially moving beyond established trade law into broader geopolitical control.
This narrative relies on framing the conflict as a simple choice between legal authority and economic fairness. However, it obscures the systemic implication that economic vulnerability is leveraged into political demands. The focus on "balance-of-payments" and "international payments problems" serves to create an external crisis, justifying extraordinary measures. The cost of this dynamic is borne by the entities most affected—small businesses—which are positioned as victims of an overreach, while the broader structural drivers of trade imbalances and geopolitical pressures remain unaddressed.
Patterns detected: ARC-0018 Moral Panic, ARC-0024 Ambiguity, ARC-0043 Motte-and-Bailey (framing the conflict as a simple legal battle), ARC-0054 Authority Games (appeal to legal authority vs. practical reality).
Sentinel — Human
The article reports a specific court ruling that limits presidential tariff authority, contextualizing the immediate legal victory against the backdrop of ongoing, high-stakes trade investigations.