Trade court strikes down Trump's new global tariffs

A federal trade court has struck down President Trump's 10% global tariffs, ruling in a 2-1 decision that the president overstepped the authority Congress granted him under the Trade Act of 1974. The ruling marks the second major legal defeat for the administration's tariff strategy in less than a year, and it could open the door to refunds for thousands of businesses that have been paying the import taxes.

The Court of International Trade in New York found the tariffs "invalid" and "unauthorized by law," siding with small businesses that sued after the levies took effect. The ruling directly applies to the plaintiffs — the state of Washington, spice importer Burlap & Barrel, and toy company Basic Fun! — but trade lawyers say the implications are far broader.

"Other importers likely will now ask for a broader remedy that applies to more companies," said Dave Townsend, a trade lawyer at Dorsey & Whitney. Companies that have been paying the tariffs could seek refunds, and the decision creates a legal precedent that undermines the legal foundation of the administration's broader trade strategy.

The case centers on a fundamental question of constitutional power: who gets to set tariffs? The Constitution grants Congress the authority to establish taxes, including tariffs, but lawmakers have over the decades delegated some of that power to the president through various trade laws. The court's majority concluded that Trump stretched that delegated authority beyond what Congress intended.

This is the second time the courts have rejected the administration's tariff approach. In February, the Supreme Court struck down even broader double-digit tariffs that Trump had imposed last year on nearly every country, ruling that the International Emergency Economic Powers Act did not authorize their use. The administration then pivoted to Section 122 of the Trade Act of 1974 to impose the current 10% worldwide tariffs, which were set to expire July 24.

The administration is expected to appeal to the U.S. Court of Appeals for the Federal Circuit, and potentially to the Supreme Court. But the legal pattern is clear: courts are pushing back on expansive interpretations of presidential tariff authority, and each ruling narrows the legal pathways available to the White House.

The political and economic implications are significant. The tariffs have been a cornerstone of Trump's economic policy, intended to reshape global trade relationships and protect American manufacturers. But they have also increased costs for businesses that rely on imported goods, from toy makers to food importers to electronics manufacturers. The legal defeats raise questions about whether any version of the broad tariff strategy can survive judicial scrutiny.

The administration is already pursuing alternative paths. The Office of the U.S. Trade Representative is investigating whether 16 trading partners — including China, the European Union, and Japan — are overproducing goods and driving down prices. It is also investigating whether 60 economies do enough to prohibit trade in products made with forced labor. Either investigation could result in new tariffs on different legal grounds.

Jay Foreman, CEO of Basic Fun!, captured the moment bluntly: "We fought back today and we won, and we're extremely excited." His company, like many small businesses, had been absorbing tariff costs that cut directly into margins on imported toys.

**What This Means For You:** If you're a business owner who has been paying these tariffs, this ruling potentially opens the door to refund claims — talk to a trade lawyer about whether you qualify. If you're a consumer, this could eventually mean lower prices on imported goods, but expect delays while the appeal process plays out. If you're watching the broader economic picture, the key takeaway is that the courts are systematically rejecting expansive presidential tariff authority — which means the administration's trade policy is running out of legal roads. Whatever comes next will need to be built on narrower, more defensible legal foundations, and that constrains how aggressive future tariff actions can be.