A federal trade court ruled Thursday that President Donald Trump unlawfully imposed his latest round of sweeping global tariffs, delivering another major legal setback to an economic strategy that the administration has repeatedly defended as essential to reviving American manufacturing and reducing trade deficits.
The ruling from the U.S. Court of International Trade came as new first-quarter economic data raised further questions about whether the administration’s tariff-heavy trade agenda has produced the manufacturing resurgence Trump promised during his return to the White House campaign. Instead of rapid industrial growth, the new analysis found declining manufacturing employment and a widening trade deficit during the opening months of 2026.
In a 2-to-1 decision, the Court of International Trade found that Trump improperly used Section 122 of the Trade Act of 1974 to impose a 10 percent tariff on most imports after the Supreme Court earlier this year struck down broader tariffs the administration had attempted to justify through emergency powers. The tariffs at issue were widely viewed as the administration’s fallback plan after the earlier Supreme Court defeat.
The court’s majority concluded that Trump’s February proclamation imposing the tariffs “is invalid, and the tariffs imposed on Plaintiffs are unauthorized by law.”
Judges Mark Barnett and Claire Kelly, both Obama appointees, sided with the plaintiffs, while Judge Timothy Stanceu, a George W. Bush appointee, dissented.
Although the ruling represented another significant legal rebuke of Trump’s tariff strategy, its immediate impact was limited. The court barred tariff collection only from Washington state and two companies that challenged the policy, spice importer Burlap & Barrel and toy company Basic Fun!, after determining that those plaintiffs had standing to pursue the case. The decision stopped short of nationwide relief for the hundreds of thousands of businesses that continue paying the tariffs while the appeals process moves forward.
Even with the narrow injunction, the ruling intensified scrutiny over the administration’s repeated attempts to expand presidential trade authority after courts rejected earlier legal justifications for the tariffs.
Trump first relied on emergency powers to impose sweeping tariffs before the Supreme Court struck down that approach earlier this year. The administration then turned to Section 122 of the Trade Act of 1974, a rarely used provision allowing presidents to impose temporary import surcharges of up to 15 percent for no more than 150 days when the United States faces “fundamental international payments problems,” including “large and serious United States balance-of-payments deficits.”
Critics argued from the outset that the statute was never intended to authorize a broad modern tariff regime affecting massive portions of global trade. Democratic-led states, businesses, and trade lawyers challenging the policy argued that the Nixon-era provision was designed for narrow balance-of-payments emergencies rather than long-term tariff programs aimed at restructuring international trade relationships.
During oral arguments last month, members of the three-judge panel openly questioned whether Section 122 could legally support the administration’s sweeping tariff program at all.
Jeffrey Schwab, senior counsel and director of litigation at the Liberty Justice Center, which represented Burlap & Barrel and Basic Fun!, said the administration’s interpretation stretched the law beyond its intended purpose.
“Congress authorized the President to impose tariffs where the United States experienced fundamental international payments problems and needed to respond to large and serious balance-of-payments deficits,” Schwab said. “That is not the situation here.”
Legal observers said the ruling could become an important precedent even though the relief currently applies only to a limited group of plaintiffs.
Tim Brightbill, a trade attorney at Wiley Rein, said the decision “means the tariffs will stay in place for nearly all parties while the appeal process plays out,” though he also described the ruling as a “decisive rejection” of Trump’s use of Section 122. “This decision will surely be appealed by the administration,” Brightbill added.
An appeal would move the dispute to the U.S. Court of Appeals for the Federal Circuit, which has already ruled against separate Trump tariffs imposed under emergency authorities.
For businesses involved in the lawsuit, the ruling represented a significant victory after months of financial uncertainty tied to the administration’s tariff policies and broader disruptions to global supply chains.
“This ruling is a major victory for small businesses like ours,” Ethan Frisch and Ori Zohar, co-founders and co-CEOs of Burlap & Barrel, said in a statement.
Jay Foreman, CEO of Basic Fun!, similarly called the ruling “an important win for American companies that rely on global manufacturing.”
Trade groups representing smaller import-dependent companies argued that the court should have gone further by suspending tariff collection entirely during the appeals process. Dan Anthony, executive director of the We Pay the Tariffs coalition, said the decision was “more positive news” for businesses harmed by the tariffs, but argued that the economic damage from the policy was continuing to spread.
“The Court should have gone further and blocked collection of these tariffs during any appeal,” Anthony said.
“American businesses paid roughly $8 billion in Section 122 tariffs in March alone, and that was just the beginning of their impacts,” he added.
The legal defeat also arrived at a politically difficult moment for the administration’s economic messaging. A new first-quarter 2026 analysis from the Rethink Trade program at the American Economic Liberties Project found that Trump’s “actions on trade have not delivered on his promises to quickly balance trade and revitalize US manufacturing.”
According to the analysis, U.S. manufacturing employment has declined by 82,000 jobs since Trump returned to office last year. The report also found that the nation’s trade deficit during the first three months of 2026 exceeded the same period in 2024, directly undercutting one of the administration’s primary economic arguments for imposing sweeping tariffs.
Throughout the campaign and after returning to office, Trump repeatedly portrayed tariffs as a mechanism for rapidly restoring domestic manufacturing jobs, reducing dependence on foreign imports, and forcing trading partners to renegotiate economic relationships more favorable to the United States. The latest data, however, suggested that those outcomes have not materialized in the way the administration projected.
Lori Wallach, director of Rethink Trade, argued that the administration’s tariff strategy had become increasingly erratic and disconnected from the manufacturing priorities it publicly claimed to champion.
“The first-quarter 2026 data show President Trump’s promises to prioritize speedily cutting the trade deficit and create more American manufacturing jobs are getting undermined by his chaotic and often mistargeted use of tariffs and squandering of leverage to demand other countries gut their Big Tech anti-monopoly and other policies instead of mercantilist abuses fueling the trade deficit,” Wallach said.
Democratic lawmakers also used the court ruling and economic data to intensify criticism of the administration’s broader economic agenda, arguing that consumers and smaller businesses were absorbing the costs of tariffs without receiving the promised economic benefits.
Rep. John Larson of Connecticut, a member of the House Trade Subcommittee, said the administration must immediately halt the tariffs and refund Americans harmed by the policy.
“Trump must comply with the law by ending his illegal tax on the American people and getting families and small businesses the refunds they are owed,” Larson said.
“The Supreme Court already rebuked the president’s costly tariffs, but Donald Trump sees our Constitution as a mere suggestion to follow, and not the law of the land,” Larson continued. “As families are squeezed by sky-high grocery bills and gas prices, his latest round of tariffs is only pouring salt in the wound. The average household has already had nearly $2,000 stolen from them by this administration, and they should not have to pay a penny more.”
Despite the latest legal setback, the administration is continuing efforts to preserve and expand its broader tariff agenda through alternative statutory authorities. In March, the Office of the U.S. Trade Representative launched investigations into dozens of countries under Section 301 of the Trade Act of 1974, a separate authority widely expected to form the basis for another wave of tariffs later this summer.
That continuing escalation has fueled concerns among critics that the administration is pursuing successive legal justifications for sweeping tariffs even after multiple courts rejected earlier approaches. The Court of International Trade ruling did not dismantle Trump’s tariff system nationwide, and most importers remain subject to the duties while litigation continues. But the decision added to mounting legal and economic pressure surrounding a trade strategy that courts increasingly view as legally vulnerable and that new economic data suggests has failed to deliver the manufacturing boom repeatedly promised to American workers.
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