Federal court hears new case against Trump’s latest global tariffs

NEW YORK (AP) — The centerpiece of President Donald Trump’s economic policy — sweeping taxes on global imports — is under legal assault again.

The U.S. Court of International Trade, a specialized court in New York, heard oral arguments Friday in an attempt to overturn the temporary tariffs Trump turned to after the Supreme Court in February struck down his preferred choice — even bigger, even more sweeping tariffs.

In his first attempt to impose global tariffs, the president last year invoked the 1977 International Emergency Economic Powers Act (IEEPA), using the law to declare America’s longstanding trade deficit a national emergency and to impose double-digit worldwide taxes on imports to combat it. He interpreted the law broadly to justify tariffs of whatever size he wanted, whenever he wanted to impose them, on whatever country he wanted to target.

The Supreme Court struck those tariffs down on Feb. 20, saying IEEPA did not authorize the use of tariffs to counter national emergencies.

But Trump had alternatives to IEEPA. The quickest option was Section 122 of the Trade Act of 1974, which allows the president to impose global tariffs of up to 15% for 150 days, after which congressional approval is needed to extend them. After his defeat at the Supreme Court, Trump quickly announced 10% Section 122 tariffs. He said he’d raise them to the maximum 15% but hasn’t yet done so. The tariffs are scheduled to expire July 24.

Two dozen states and some businesses quickly challenged the new tariffs in court. Friday’s hearing lasted more than three hours as a three-judge panel tried to assess a provision that had never been used before to impose tariffs and to analyze congressional decisionmaking from more than a half century ago.

The judges intensely questioned lawyers for both the plaintiffs and the government about what certain terms mean including what precisely the term “balance-of-payments deficits” meant when it was used in the Trade Act of 1974 and what it means today.

“I think the judges asked tough questions of all sides and were genuinely trying to find out what Congress meant when it passed section 122,” said Jeffrey Schwab, senior counsel and director of litigation for Liberty Justice Center, which represents some of the plaintiffs.

“I would be stunned if the challengers prevail,’’ said trade lawyer Ryan Majerus, a partner at King & Spalding law firm and a former U.S. trade official.

The trade court’s judges, he said, are likely to defer to the president and allow the Section 122 tariffs to stay, considering that they will expire in three and a half months anyway. “I just don’t see them sticking their neck out on this one, given how temporarily it’s in place and how much discretion these courts give to the president,’’ he said.

Section 122 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.

The provision 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 had needed to invoke IEEPA because Section 122 did “not have any obvious application’’ in fighting trade deficits, which it called “conceptually distinct’’ from payments problems.

Awkwardly for the plaintiffs challenging his use of the temporary tariffs, the trade court itself wrote last year in its own decision striking down IEEPA tariffs that Trump didn’t need them because Section 122 was available to counter trade deficits.

Last May, the trade court issued a decision striking down Trump’s IEEPA tariffs about two weeks after hearing oral arguments in the case. Attorney General Dan Rayfield of Oregon, one of the states challenging Trump’s latest tariffs, is eager for another speedy ruling. “We are hopeful to get a result sooner than later,’’ he said. “When the president continues to do an unlawful action and take money out of the pockets of Americans, we want a response as quickly as we can from the courts.’’

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Paul Wiseman reported from Washington.

AP Writer Lindsay Whitehurst contributed to this story.