Trade Court Rules Trump's Section 122 Tariff Proclamation Unlawful for Washington and Two Importers

A federal trade court ruled Wednesday that President Donald Trump’s February tariff proclamation under Section 122 of the Trade Act of 1974 was unlawful as applied to the plaintiffs before it — the State of Washington and two importer companies — while dismissing California and most other state plaintiffs and refusing to block the tariffs nationwide.

The ruling by a three-judge panel of the U.S. Court of International Trade marks the second major court defeat for Trump’s 2026 tariff strategy. But its immediate effect is narrower than some political statements suggested: the court granted relief only to Washington, Burlap and Barrel, Inc. and Basic Fun, Inc., not to all states or all importers.

In Slip Op. 26-47, issued May 7, Chief Judge Mark A. Barnett and Judge Claire R. Kelly held that Trump’s Proclamation No. 11012 exceeded the limits of Section 122, a rarely used provision that allows temporary import restrictions in response to serious international payments problems. Judge Timothy C. Stanceu dissented from the summary-judgment ruling.

Trump issued the proclamation on Feb. 20, and it was published in the Federal Register on Feb. 25. It imposed a 10% temporary ad valorem surcharge — a tariff charged as a percentage of a product’s value — on “all articles imported into the United States,” effective at 12:01 a.m. Eastern on Feb. 24.

The court said Section 122 is not a general tariff power. Instead, it is a narrow balance-of-payments authority, aimed at severe international payments distress. The judges found that the administration relied on trade deficits and current-account deficits, not the statutory standard requiring “fundamental international payments problems” and “large and serious balance-of-payments deficits.”

As a result, the court granted summary judgment to the two private importers and to Washington, entered a permanent injunction for those plaintiffs, and held that the duties imposed on them were not authorized by law. “Proclamation No. 11012 is invalid, and the tariffs imposed on Plaintiffs are unauthorized by law,” the opinion said.

Just as important, the court rejected most of the states’ claims on procedural grounds. It dismissed without prejudice all state plaintiffs other than Washington for lack of Article III standing, meaning the court found they had not shown the kind of direct injury needed to pursue the case in federal court. That group included California, Oregon, Arizona and New York, among others.

That detail sharply limits the reach of the decision. The court declined to issue a universal injunction, so the order does not automatically stop the Section 122 tariffs for every importer or every state. Instead, the opinion said the prevailing plaintiffs can be made whole through the injunction and through reliquidation and refunds with interest on Section 122 duties they already paid.

California Attorney General Rob Bonta described the ruling in a press release as “another major victory for American consumers and small businesses nationwide.” But California itself did not obtain relief in the case because its claims were dismissed for lack of standing.

The case arose after an earlier setback for the administration’s tariff program. On Feb. 20, the U.S. Supreme Court ruled in Learning Resources, Inc. v. Trump that Trump’s earlier tariff regime under the International Emergency Economic Powers Act, or IEEPA, was not authorized by that law. Section 122 became the administration’s next legal vehicle for keeping a broad tariff program in place.

This week’s ruling narrows that second effort too, though only for the parties who won. For now, the court’s remedy is specific: an injunction protecting Washington and the two importer plaintiffs, plus refunds with interest for duties already paid, not a blanket shutdown of the tariff program.