When a court judges against a government that has chosen not to be ruled against, an odd thing occurs. Almost nothing changes for the majority of people once the ruling has all the formal weight of the judiciary, including opinions, citations, and a permanent injunction. On May 7, a divided three-judge panel in the U.S. Court of International Trade ruled that President Trump’s 10% global tax, which was imposed under Section 122 of the Trade Act of 1974, was illegal. For the second time this year, a Trump tariff scheme was overturned by a court. Additionally, the duties continued to be collected the following morning for the vast majority of American importers.
The legal logic was sufficiently clear. In the fifty years after it was passed into law, no president has ever used the limited provision known as Section 122. It permits temporary import surcharges of up to 15% for a maximum of 150 days, but only in response to what the law refers to as “fundamental international payments problems”—that is, acute balance-of-payments crises involving collapsing currencies and emergency situations, rather than the decades-long trade deficits the US has carried. Chief Judge Mark Barnett and Judge Claire Kelly headed the 2-1 majority, which effectively stated that the administration had grabbed for a fire extinguisher to address a slow leak. The requirements of the statute were not fulfilled. The proclamation exceeded the limit of the granted authorities.
The way the court confined this decision is what makes it unique and actually fascinating. Rather of issuing a worldwide injunction, the CIT only prevented collection for the state of Washington and two small businesses, Burlap & Barrel and Basic Fun!, who could demonstrate that they had paid the tariffs and would suffer irreversible injury. Since the remaining state plaintiffs had not paid the duties directly, it was determined that they lacked standing. As a result, you have this strange legal situation where the tariffs are still enforceable against almost everyone despite being ruled unlawful. One warehouse provides respite to a spice importer. Across the street, the same importer continues to make payments. For a lawyer, this is the kind of result that makes perfect sense, but for everyone else, it makes very little sense.
Anyone who has observed this White House in action would have predicted the administration’s response. In order to continue collecting the funds while the appeal was pending, the Department of Justice promptly filed an appeal with the Federal Circuit. As expected, the executive branch’s stance has been more along the lines of “we’ll keep doing exactly what we were doing” than “we’ll respect the ruling while we contest it.”
That position is reminiscent of the previous IEEPA battle, in which the government collected over $166 billion in tariffs that were ultimately declared unlawful while a CIT injunction was delayed all the way up to the Supreme Court. Only recently have refunds for that round begun to be processed. Many of those damages, such as strained relationships with suppliers, lost contracts, and companies that just failed, cannot be reimbursed.
That incident seems to have taught the court a lesson. Just two days ago, on May 20, the CIT made a major decision by declining to postpone its own injunction pending appeal, stating clearly that doing so would “compound the losses” incurred by the participating enterprises. That’s a subtle but direct admission that the prior stay was incorrect and that allowing an unlawful tariff to continue for a year while the appeals were pending had resulted in actual, irreversible harm. It remains to be seen if the Federal Circuit and, ultimately, the Supreme Court share this view. The fact that the Federal Circuit has already issued a temporary administrative stay indicates that the appellate courts are not yet prepared to follow the trade court’s example.
Beneath all of this is a clock that modifies the calculus. Unless Congress specifically extends the Section 122 tariffs, which it has no intention of doing, they expire by legislation on July 24, 2026. The tariffs will probably expire on their own before the appeals are decided, making the legal battle somewhat academic. Refunds are the true fight, the one that will go past July. Importers will be entitled to reimbursement if the courts decide that the duties were unlawful from the beginning. This battle is likely to be protracted, acrimonious, and waged entry by entry because the administration strongly opposed refunding firms in the prior round.
As this develops, it’s difficult to ignore how the administration has effectively seen unfavorable court decisions as an expense of conducting business rather than a restriction on it. There is consistency in the pattern. Bring up a combative legal theory. Gather the tariffs. In court, lose. Make an appeal. Continue to gather throughout the appeal. When one statutory authority is overturned, switch to another.
The White House switched to Section 122 within hours—literally the same day—after the Supreme Court struck down the IEEPA tariffs in February. The Office of the U.S. Trade Representative is already conducting Section 301 investigations, which will most likely result in a fresh round of tariffs this summer on stronger legal grounds now that Section 122 is faltering. The particular statute is always evolving. The tariffs themselves remain mostly unchanged.