The same New York court that paved the way to the invalidation of President Donald Trump’s International Emergency Economic Powers Act (IEEPA) duties heard oral arguments against his most recent tranche of tariffs on Friday.
The Court of International Trade is now considering a case brought by small businesses and two dozen states that aims to unravel the president’s latest 10 percent universal tariffs, levied using Section 122 of the Trade Act of 1974. Trump issued the executive order on Feb. 24, days after the Supreme Court ruled the IEEPA tariffs were unlawful, and vowed soon after to increase the rate to 15 percent.
The plaintiffs argue that the new tariffs were improperly imposed under an out-of-date provision that’s never been used by another sitting president. Section 122 is a statute conceived to rectify balance-of-payments issues, but it’s obscure and its use lacks historical precedent. Much of Friday’s hearing centered on what constitutes a balance-of-payments deficit, or whether the White House’s assertion that the United States is embroiled in a “fundamental international payments problem” holds water.
The Liberty Justice Center argued on behalf of the plaintiffs that the law was meant to address a more specific circumstance, like the currency crisis that precipitated the law’s conception, for example. The Trump administration has argued that the country’s pervasive trade deficit with the rest of the world—which has worsened since it began imposing tariffs over a year ago—constitutes a balance-of-payments deficit, which is defined as an imbalance that occurs when a country’s total payments to other countries don’t measure up to what it’s receiving in return.
The three-judge panel, which heard arguments for three hours, appeared flummoxed by how to interpret the law. “We’re not quite sure how to translate 1974 into 2026,” Judge Timothy Stanceu said. The panel did not indicate when a decision on the case would be decided. Trump’s Section 122 tariffs are due to expire in July, and as such, the federal government has accelerated two Section 301 investigations with the aim of swiftly replacing them with new tariffs.
That plan may prove unpopular with consumers still reeling from the price increases precipitated by the IEEPA tariffs, and more recently, by the war with Iran.
On Friday, the Bureau of Labor Statistics’ Consumer Price Index report revealed that inflation increased threefold in March, with the annual rate reaching 3.3 percent, up from 2.4 percent in February. The monthly rate measured 0.9 percent, driven chiefly by the effects of the war on the world’s oil supply. Gas prices spiked by more than 21 percent in March.
As such, shoppers’ collective outlook on the economy is in the doldrums.
A consumer survey released by the University of Michigan on Friday revealed that sentiment fell 11 percent in early April to a reading of 47.6—the lowest reading seen in the post-World War II era, including the Great Recession of 2008 and the Covid-19 pandemic.
“Open-ended comments show that many consumers blame the Iran conflict for unfavorable changes to the economy,” survey director Joanne Hsu said in a statement accompanying the report. “Demographic groups across age, income, and political party all posted setbacks in sentiment, as did every component of the index, reflecting the widespread nature of this month’s fall.”
Meanwhile, data released by the Bureau of Economic Analysis on Thursday showed that inflation-adjusted consumer spending rose by the slimmest of margins—0.1 percent—in February due to the effects of inflation. BEA analysts wrote that real disposable income shrank by 0.5 percent, the biggest decrease in almost a year.
