A coalition of 24 states has brought a lawsuit against former President Donald Trump, challenging his recent imposition of global tariffs under Section 122 of the Trade Act of 1974. This legal action follows a decision by the Supreme Court to overturn Trump’s earlier tariffs under the International Emergency Economic Powers Act (IEEPA). The lawsuit, filed in the US Court of International Trade, contends that the Section 122 tariffs were improperly applied.
Section 122 has never been used by any prior president and is designed for emergency scenarios characterized by “fundamental international payments problems.” Such problems require specific conditions, including a significant balance-of-payments deficit or currency depreciation issues, none of which the states assert were met. The coalition argues that Trump improperly conflated the goods trade deficit with a broader balance-of-payments deficit, neglecting the US financial account surplus. The lawsuit points to a marginal balance-of-payments issue, amounting to just 0.2% of GDP, which is inadequate to justify the tariffs.
The legal challenge further argues that Section 122’s relevance has diminished since its inception during the 1974 Nixon Shock. With modern currency values largely determined by market dynamics, the states claim that the economic conditions intended by the statute are no longer applicable.
Moreover, the states argue that Trump’s tariffs violated statutory requirements related to nondiscriminatory treatment and broad product coverage. The exemptions provided to nations like Canada and Mexico allegedly breach Section 122’s nondiscrimination principle, which mandates consistent application across imports. Exemptions made without supporting factual findings are also alleged to contravene Section 122, which prescribes uniform product coverage unless economic needs dictate otherwise.
This lawsuit is part of a broader pattern of legal disputes in the turbulent landscape of US tariff policy, where numerous companies are also pursuing litigation to recover tariffs they paid under previous Trump administration measures, highlighting ongoing complexities in international trade relations.