More Than Two Dozen States Challenge Trump’s Replacement Tariffs After Supreme Court Loss

What Happened

Twenty-four states filed suit Thursday against President Trump’s new 15% global tariffs. They argue he is overstepping executive authority by using a never-before-invoked provision to replace levies the Supreme Court struck down last month.

The lawsuit is led by Democratic attorneys general from Oregon, Arizona, California, and New York. It targets tariffs Trump imposed under Section 122 of the Trade Act of 1974 after the Court invalidated his previous duties imposed under emergency powers law.

Section 122 allows presidents to impose tariffs of up to 15% for five months unless Congress extends them. But the provision was designed for ‘fundamental international payments problems.’ It specifically addressed the financial crises of the 1960s and 1970s. During that period, other countries were dumping dollars for gold at fixed rates, threatening currency collapse.

The states argue this narrow purpose does not cover trade deficits. They say deficits are conceptually distinct from the balance-of-payments crises the provision was meant to address.

The timing creates awkward contradictions for the White House. Trump’s own Justice Department argued in court filings last year that the president needed emergency powers because Section 122 had “not have any obvious application” to fighting trade deficits.

Why It Matters

The legal battle centers on whether Section 122’s language about “fundamental international payments problems” includes trade deficits.

When Congress wrote the provision in 1974, the concern was maintaining dollar stability. At the time, U.S. currency remained tied to gold. Countries could exchange dollars for gold at fixed rates. Excessive dollar dumping threatened to drain U.S. gold reserves and collapse the currency. Section 122 gave presidents authority to impose emergency tariffs to stop this financial hemorrhaging.

But the dollar has not been linked to gold since 1971. The states argue this makes Section 122’s original purpose obsolete. They also argue trade deficits represent different economic dynamics than the currency crises the provision addressed.

The administration now faces its own previous arguments working against it. Reversing that earlier position while claiming Section 122 always provided the necessary authority creates credibility problems the administration must overcome.

How It Affects You

The tariffs raised prices on a wide range of imported goods. The New York Fed estimates about $1,200 a year in additional costs for the average household through higher retail prices. But if the courts strike them down, as they did with earlier tariffs, prices could ease.

Section 122 tariffs will expire in late summer unless Congress extends them. This gives the administration a tight window to secure congressional approval or find another legal authority for replacement tariffs.

Pricing volatility is therefore likely to continue. Markets will keep reacting to ongoing legal and legislative battles rather than settling into predictable patterns.

The 24 plaintiff states argue the tariffs raise their procurement costs and strain state budgets. They also say Trump relied on an obscure law to impose sweeping trade policy while sidestepping Congress’s authority over taxation.

Refunds are becoming a major talking point. Wednesday’s ruling said companies should get back tariffs they already paid. If the process moves quickly, about $175 billion could be returned to businesses. But Trump has already imposed new tariffs to replace the old ones. Companies could receive refunds while simultaneously paying new duties that may also end up in court.