US trade court rules Trump’s new 10% tariffs ‘unlawful’ — What happens next?

A federal court on Thursday (local time) struck down the new global tariffs imposed by US President Donald Trump following a major setback at the Supreme Court. In a 2-1 decision, a three-judge panel of the Court of International Trade in New York ruled that the 10% tariffs were unlawful after a lawsuit brought by small businesses, as reported by Associated Press.

The majority said Trump exceeded the authority Congress granted the president under the law, calling the tariffs “invalid” and “unauthorized.”

If the administration challenges Thursday’s ruling, as widely anticipated, the case would first go to the U.S. Court of Appeals for the Federal Circuit in Washington and could eventually reach the Supreme Court.

The dispute centers on temporary 10% global tariffs introduced by the Donald Trump administration after the Supreme Court in February overturned broader double-digit tariffs imposed the previous year on nearly every country. The latest tariffs imposed in February were enacted under Section 122 of the Trade Act of 1974, are scheduled to expire on July 24.

The court’s decision directly blocked the collection of tariffs from three plaintiffs — the state of Washington and two businesses, spice company Burlap & Barrel and toy company Basic Fun! “It’s not clear’’ whether other businesses would have to continue to pay the tariffs, said Jeffrey Schwab, director of litigation at the libertarian Liberty Justice Center, which represented the two companies, AP reported.

“We fought back today and we won, and we’re extremely excited,” Jay Foreman, CEO of Basic Fun!, told reporters Thursday.

The Supreme Court ruled Feb. 28 that IEEPA did not authorise the tariffs. The U.S. Constitution gives Congress the power to establish taxes, including tariffs, though lawmakers can delegate tariff power to the president, AP reported.

What happens next?

Jeffrey Schwab, a senior counsel for Liberty Justice Center, who represented the small businesses that filed one of the cases before the trade court, said the next steps would depend on how the administration responds and whether the US Justice Department will appeal, as reported by Bloomberg.

Jay Foreman, chief executive officer of Basic Fun Inc., one of the companies that sued, praised the decision on a call with reporters, saying that it took “a lot of guts and chutzpah” for small businesses to put themselves on the line.

Foreman said his company has been paying the contested tariffs almost daily since they took effect, and estimated they had paid more than $100,000 so far.

US customs authorities collected roughly $8 billion in Section 122 tariffs in March alone, according to government data analysed by We Pay the Tariffs, a coalition of small businesses, Bloomberg reported.

“Today’s ruling is more positive news for the small businesses that have been crushed by these illegal taxes,” Dan Anthony, who leads the coalition, said in a statement following the ruling. “The court should have gone further and blocked the collection of these tariffs during any appeal.”

The Trump administration has already begun pursuing alternatives to the tariffs the Supreme Court struck down in January, launching two investigations that could lead to new trade duties, AP reported.

The Office of the U.S. Trade Representative is examining whether 16 trading partners, including China, the European Union and Japan, are producing excess goods that depress prices and disadvantage U.S. manufacturers.

Separately, it is reviewing whether 60 economies, ranging from Nigeria to Norway and representing 99% of U.S. imports, are doing enough to block goods made with forced labour.

(With inputs from agencies)