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"Administration confused balance of payments and trade balance"...Plaintiffs win 2-1 without full trial
Refusal to apply universal ruling beyond plaintiffs...WSJ "Initially temporary application, limited immediate impact"
The first-instance court ruled that the 'global 10% tariff' invoked by US President Donald Trump to replace the reciprocal tariffs that were ruled illegal is also invalid.
Following the US Supreme Court's ruling in February that the imposition of reciprocal tariffs (country-specific tariffs) based on the International Emergency Economic Powers Act (IEEPA) was illegal, the Trump administration's 'Plan B' tariff policy has also been halted by the judiciary.
On the 7th (local time), a three-judge panel of the US Court of International Trade ruled 2-1 in favor of the plaintiffs, stating that the 10% global tariff newly imposed by the Trump administration on all trade partners worldwide, based on Section 122 of the Trade Act, violates the law and is therefore invalid.
The court issued a permanent injunction, stating that the 10% global tariff cannot be applied to the importing companies that filed the lawsuit, and ordered the Trump administration to refund the tariffs already paid by the plaintiff companies, with interest.
Previously, after the Federal Supreme Court ruled in February that the imposition of reciprocal tariffs based on IEEPA was illegal, President Trump had imposed a global 10% tariff on all countries worldwide under Section 122 of the Trade Act.
In response, US small and medium-sized businesses, including spice importer Burlap & Barrel and toy importer Basic Fun, filed a lawsuit with the US Court of International Trade in March, arguing that the 10% global tariff imposed by the Trump administration based on Section 122 of the Trade Act was illegal.
More than 20 states, including Oregon, also filed similar lawsuits against the Trump administration, but the court dismissed most of the claims, stating that the remaining states, except Washington, did not have standing as plaintiffs.
Section 122 of the Trade Act, which the Trump administration used as the basis for imposing the 10% global tariff, grants the President the authority to impose tariffs for up to 150 days to resolve large and serious balance of payments deficits.
The majority of judges on the panel ruled that the Trump administration failed to meet the requirements of Section 122 of the Trade Act by confusing the balance of payments and the trade deficit when issuing the order to impose a 10% global tariff, even though these are fundamentally different concepts.
The balance of payments refers to an economic indicator that measures all forms of economic transactions between domestic residents and foreign entities, including not only goods but also services, income, transfers, and finance.
In contrast, a trade deficit is generally a concept limited to goods transactions.
Some legal experts opined that the 10% tariff based on Section 122 of the Trade Act was even more clearly illegal than the IEEPA basis, suggesting that the Trump administration might have intended to use Section 122 of the Trade Act to buy up to 150 days while planning to restructure the tariff system using Section 301 of the Trade Act and Section 232 of the Trade Expansion Act.
The court's decision today was rendered after the court accepted the plaintiffs' request and omitted a hearing on the facts (summary judgment).
The court rejected the request to apply the 10% global tariff injunction universally, beyond the plaintiff companies.
Meanwhile, dissenting Judge Timothy Stanceu disagreed with the majority's legal interpretation and ruled that the court's ex officio omission of a hearing was a procedural error, stating that all parties to the lawsuit should have been given a reasonable opportunity to respond.
The Wall Street Journal (WSJ) analyzed that the immediate impact of this ruling may be limited.
The newspaper stated, "The 10% tariff under Section 122 of the Trade Act was scheduled to expire in July, at which point the administration plans to transition to a different tariff system," and "Furthermore, because the court refused a universal injunction, not all importers nationwide will receive immediate relief under this ruling."
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