Story Highlights
- The U.S. Court of International Trade ruled 2-1 on May 7, 2026 that the 10% global tariffs Trump imposed under Section 122 of the Trade Act of 1974 — after losing at the Supreme Court on IEEPA tariffs — are also unlawful.
- The U.S. Court of Appeals for the Federal Circuit has temporarily paused the lower court’s ruling pending appeal, meaning businesses must continue paying the Section 122 tariffs for now.
- The government is actively processing $35.46 billion in refunds to approximately 86,874 importers for previously invalidated IEEPA tariffs, with up to $166 billion in total refunds eventually expected.
What Happened
The tariff saga that has defined the economic dimension of President Donald Trump‘s second term reached another pivotal legal juncture this month when the U.S. Court of International Trade in New York ruled 2-1 that the 10% global tariffs Trump had imposed after his defeat at the Supreme Court are themselves unlawful. The court found the tariffs — imposed under Section 122 of the Trade Act of 1974 — to be “invalid” and “unauthorized by law,” in a ruling brought by small businesses represented by the libertarian Liberty Justice Center, the state of Washington, spice company Burlap & Barrel, and toy company Basic Fun!
The backstory is essential context. On February 20, 2026, the Supreme Court issued a 6-3 decision in Learning Resources, Inc. v. Trump, authored by Chief Justice John Roberts, holding that the International Emergency Economic Powers Act does not authorize the president to impose tariffs. The ruling invalidated a sweeping set of emergency tariffs Trump had imposed beginning in early 2025, covering imports from Canada, Mexico, China, and most other U.S. trading partners — including rates as high as 145% on Chinese goods. The Court held that the Constitution’s express assignment of the tariff power to Congress means that vague statutory language cannot be read to grant the executive branch that power without clear congressional authorization.
Following the February ruling, Trump quickly pivoted to Section 122 of the Trade Act of 1974, a statute that had never previously been used to impose tariffs, to reimpose a 10% universal import tax. The same coalition of small businesses sued again, arguing that the Section 122 tariffs suffered from the same constitutional deficiency. The Court of International Trade agreed in its May 7 ruling. However, the U.S. Court of Appeals for the Federal Circuit — the specialized appellate court above the trade court — quickly granted the government’s request for an administrative stay of the lower court’s ruling, meaning the Section 122 tariffs remain in effect for the time being while the appeal proceeds.
Simultaneously, the administration is processing refunds from the first round of invalidated tariffs. In April, U.S. Customs and Border Protection launched the Consolidated Administration and Processing of Entries portal — known as CAPE — to manage what officials estimate is $166 billion in total refund liability owed to approximately 330,000 importers. By mid-May, CBP had approved 86,874 refund applications covering 15.1 million qualifying import entries, with an initial tranche of $35.46 billion in refunds actively being processed. Refunds are expected to reach importers’ bank accounts within 60 to 90 days of submission.
Why It Matters
The constitutional dimension of this ongoing battle is momentous. At its heart, the tariff litigation has forced courts to define the outer boundary of executive economic power — specifically, how much authority Congress can delegate to the president over the power to tax, and whether that delegation requires precise statutory language or can be inferred from broad emergency powers statutes. The Supreme Court’s February ruling answered that question emphatically in the negative for IEEPA. The Court of International Trade’s May 7 ruling suggests the same logic may apply to Section 122, a conclusion that would leave the administration with limited statutory options for imposing broad universal tariffs without new congressional authorization.
For the American economy, the implications are substantial. If the appellate courts ultimately uphold the trade court’s Section 122 ruling, and the tariffs are again invalidated, the government would face another multi-billion dollar refund obligation. The accruing interest alone on the $166 billion IEEPA refund pool runs approximately $22 million per day, according to court filings — a fiscal cost that grows with every day of litigation delay. Businesses that have restructured supply chains, renegotiated contracts, and absorbed higher input costs based on tariff assumptions are operating in an environment of extreme legal uncertainty, which itself carries economic costs in the form of deferred investment and planning paralysis.
The tariff cases have also highlighted a fundamental tension in American trade law. While the Supreme Court has now firmly ruled that IEEPA does not grant tariff authority, the broader regime of congressionally delegated tariff power — through Section 232, Section 301, and other statutes — remains intact. The administration continues to use these authorities aggressively, maintaining tariffs on steel, aluminum, automobiles, semiconductors, and Chinese goods specifically. The average U.S. tariff rate on Chinese imports still stands at roughly 47.5% following the adjustments made at last year’s South Korea summit.
Economic and Global Context
The scale of the tariff refund operation is staggering by historical standards. With $166 billion owed to approximately 330,000 importers and interest compounding at $22 million per day, the refund program represents one of the largest reverse-collection exercises in U.S. Customs history. Major American retailers — including Walmart, Target, Nike, Gap, and Home Depot — are among the expected beneficiaries. For small importers, however, the CAPE portal’s complexity and the 60 to 90 day processing window present meaningful operational challenges for businesses managing cash flow.
Global trading partners have watched the tariff litigation with intense interest. Two-way U.S.-China goods trade stood at roughly $415 billion in 2025, down sharply from its 2022 peak of $690 billion — a contraction driven directly by tariff escalation. The European Union has maintained its own retaliatory posture, though a framework deal caps EU-U.S. tariffs at 15% on most goods. Canada and Mexico, whose cross-border trade architecture was disrupted dramatically by the IEEPA tariffs, have cautiously welcomed the refund program while maintaining parallel dispute resolution proceedings at the World Trade Organization.
The interest rate dimension adds a macroeconomic layer. The $22 million daily interest accumulation on unpaid tariff refunds creates a form of compelled government borrowing that the Treasury must ultimately finance. In an environment where fiscal deficits are already projected to expand significantly over the next decade, these novel liabilities are beginning to attract attention from bond markets and credit rating agencies.
Implications
For the administration, the immediate path forward is an appeal to the Federal Circuit and, ultimately, a potential return to the Supreme Court on the Section 122 question. The Federal Circuit’s administrative stay preserves the status quo — keeping the 10% tariffs in place — while the legal process unfolds over what could be another six to twelve months. The administration is also pursuing new Section 232 and Section 301 tariff actions that do not depend on emergency powers, seeking to build a legally durable tariff architecture on firmer congressional footing.
For American importers and the businesses that depend on them, the uncertainty argues for continued supply chain diversification, hedging strategies on import costs, and active engagement with the CAPE refund portal. Trade lawyers anticipate a wave of additional claims and litigation from companies that were not among the initial three plaintiffs but who may now seek broader remedies based on the May 7 ruling.
For Congress, the tariff cases present a clarifying moment: the courts have twice now told the executive branch it lacks unilateral tariff authority, and any durable broad-based tariff regime will require legislation. Whether Congress is willing to enact explicit tariff authorization — effectively delegating its constitutional power formally rather than through ambiguous statute — is one of the defining trade policy questions of the 2026 session.
Sources
“Federal court rules against new global tariffs Trump imposed after loss at the Supreme Court”Â
