Some two dozen states challenged President Donald Trump’s new global tariffs on Thursday, filing a lawsuit over import taxes he imposed after a stinging loss at the Supreme Court.
The Democratic attorneys general and governors in the lawsuit argue that Trump is overstepping his power with planned 15% tariffs on much of the world.
Trump has said the tariffs are essential to reduce America’s longstanding trade deficits. He imposed duties under Section 122 of the Trade Act of 1974 after the Supreme Court struck down tariffs he imposed last year under an emergency powers law.
Section 122, which has never been invoked, allows the president to impose tariffs of up to 15%. They are limited to five months unless extended by Congress.
The lawsuit is led by attorneys general from Oregon, Arizona, California and New York.
“The focus right now should be on paying people back, not doubling down on illegal tariffs,” said Oregon Attorney General Dan Rayfield. The suit comes a day after a judge ruled that companies who paid tariffs under Trump’s old framework should get refunds.
The new suit argues that Trump can’t pivot to Section 122 because it was intended to be used only in specific, limited circumstances — not for sweeping import taxes. It also contends the tariffs will drive up costs for states, businesses and consumers.
Many of those states also successfully sued over Trump’s tariffs imposed under a different law: the International Emergency Economic Powers Act (IEEPA).
Four days after the Supreme Court struck down his sweeping IEEPA tariffs Feb. 20, Trump invoked Section 122 to slap 10% tariffs on foreign goods. Treasury Secretary Scott Bessant told CNBC on Wednesday that the administration would raise the levies to the 15% limit this week.
The Democratic states and other critics say the president can’t use Section 122 as a replacement for the defunct tariffs to combat the trade deficit.
The Section 122 provision is aimed at what it calls “fundamental international payments problems.’’ At issue is whether that wording covers trade deficits, the gap between what the U.S. sells other countries and what it buys from them.
Section 122 arose from the financial crises that emerged in the 1960s and 1970s when the U.S. dollar was tied to gold. Other countries were dumping dollars in exchange for gold at a set rate, risking a collapse of the U.S. currency and chaos in financial markets. But the dollar is no longer linked to gold, so critics say Section 122 is obsolete.
Awkwardly for Trump, his own Justice Department argued in a court filing last year that the president needed to invoke the emergency powers act because Section 122 did “not have any obvious application’’ in fighting trade deficits, which it called “conceptually distinct’’ from balance-of-payment issues.
Still, some legal analysts say the Trump administration has a stronger case this time.
“The legal reality is that courts will likely provide President Trump substantially more deference regarding Section 122 than they did to his previous tariffs under IEEPA,’’ Peter Harrell, visiting scholar at Georgetown University’s Institute of International Economic Law, wrote in a commentary Wednesday.
The specialized Court of International Trade in New York, which will hear the states’ lawsuit, wrote last year in its own decision striking down the emergency-powers tariffs that Trump didn’t need them because Section 122 was available to combat trade deficits.
Trump does have other legal authorities he can use to impose tariffs, and some have already survived court tests. Duties that Trump imposed on Chinese imports during his first term under Section 301 of the same 1974 trade act are still in place.
Also joining the lawsuit are the attorneys general of Colorado, Connecticut, Delaware, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New Mexico, North Carolina, Rhode Island, Vermont, Virginia, Washington, Wisconsin, and the governors of Kentucky and Pennsylvania.
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