Twenty-five states sued the Trump administration earlier this month over its latest tariffs, calling them a transparent attempt to replace the tariffs that the Supreme Court voided in February. The suit challenged tariffs imposed on 60 countries, with the rationale that these countries failed to block imports produced by forced labor. Letitia James, the New York attorney general, accused the administration of "once again trying to illegally raise taxes on families and businesses with a new round of tariffs."
It is easy to dismiss the lawsuit as a partisan effort by largely Democratic states. But the suit, which was joined by many businesses affected by the tariffs, will succeed for various reasons outlined here. When the Supreme Court struck down the president's blanket "emergency" tariff on February 20, senior administration officials vowed they would find a way to keep the tariff in place. They did, using the forced labor argument. But that argument is not at all credible.
To recap: First, as an interim measure, the president put a 150-day 10 percent tariff in place, said to be for defending the nation's balance of payments. The US Court of International Trade, which has jurisdiction over civil suits affecting trade and customs, rejected that argument. When that balance-of-payments measure expired on July 25, the administration rushed to substitute a set of retaliatory tariffs under Section 301 of the Trade Act of 1974—a flat rate of 10 percent to 12.5 percent on the products of60 countries and economies, using the forced labor argument. The new tariff covers the trade of basically all of America's large and medium-sized trading partners (less a variety of product exclusions and exempting free trade agreement goods from Canada and Mexico).
The stated basis for the new tariff: The US Trade Representative (USTR) found, after a two-and-a-half-month investigation, that all of the 60 countries failed to do enough to curb imports into their own countries of goods made with forced labor. This is despite the Trump administration previously showing only a very limited interest in forced labor or human rights.
The lawsuits have been filed not only by the 25 states but also by a number of small businesses. The states argue that they will bear an increased cost of everything that they import or use when there is an imported input into products that they buy. They argue further that the rushed (two-and-a-half month) 60-country investigation was a sham designed to maintain the tariff.
The plaintiffs also point to the fact that very diverse countries are treated alike, not in any way differentiated by rating their effectiveness in limiting imports into their markets of goods made with forced labor. Rather, somewhat better US tariff treatment depends on other reasons, for example, on whether the countries have a trade deal with the United States and promise to invest more here. The complaints note that there is no path outlined for better US treatment if a subject country takes more aggressive action against imports made with forced labor.
The bottom line: The importers contend that the imposition of this tariff is arbitrary and capricious and should be blocked by the Court of International Trade. We agree and here is why.
Besides the facts, the importers point to the legal case against the tariff: The statute, Section 301, they say, will not support a blanket tariff because Section 301 is by its terms selective. They note that there is no indication in the language or history of the statute that it can be used en masse against 60 countries that account for most of US trade. This is not what Congress provided.
In effect, they point to a basic constitutional flaw: Congress cannot delegate all of its tariff authority to the president. Section 301 gives a lot of authority to the president and the USTR, the administration's top trade envoy, as negotiating leverage, and even authority to impose retaliatory tariffs if a deal isn't forthcoming. Tariffs can be and have been set under this authority at 100 percent or more (for China up to 145 percent) selectively, against a particular country for a particular reason: that a country, after a serious investigation, was found to have harmed US trade. But a blanket tariff against most US trade is not possible without violating the Constitution. If a Section 301 tariff can be set at any level, if it is also set on goods from most countries the United States trades with, this amounts to a complete transfer of the tariff power from the Congress to the president and his officials. That the Constitution cannot allow.
What's next?
Arguments will be heard by the Court of International Trade and, on appeal, by the Federal Circuit and the Supreme Court. The challenge centers on the fact that delegations of Congress' tariff authority are always limited. Section 301 is a selective authority, not a blanket authority like explicitly broad trade authorities for use to implement trade negotiations and as a balance of payments measure. The exceptionally fast investigations cross the line into being arbitrary and capricious in nature. There is even a disconnect between the tariff remedy and the conduct complaint.
Those challenging the tariff will point to the absence of a sound basis for the USTR making the required statutory finding of a burden or restriction on US commerce. Its findings consisted of generalized observations as to how forced labor could put US goods at a competitive disadvantage, as opposed to specific findings regarding the burden or restriction arising from each country's toleration of imports made with forced labor, probably because many of the countries ban it. They will point out that any harm is so remote as to be wholly speculative.
They will supply evidence that the impact of the tariff used as a remedy is entirely disproportionate to the limited nature of the complained of conduct. Consistent US practice over the 50 years of experience with Section 301 does not include any attempt by any president or USTR to impose a blanket tariff on countries accounting for nearly all of US trade in place of the tariffs set by means approved by Congress in legislation. A comprehensive approach to tariffs has occurred only pursuant to multilateral trade agreements entered into by the executive branch under authority specifically delegated by Congress on a bipartisan basis to implement US trade agreements.
Judicial deference to the executive?
The Supreme Court has ruled that even where there is ambiguity in the authority Congress has given an executive branch agency, the courts, not the executive, will make the ultimate determination of the bounds of agency authority based on the court's "independent judgment" (Loper Bright v. Raimondo). Moreover, under the "major questions" doctrine, which holds that courts must look at the large economic and political impact of decisions, the courts will give especially close scrutiny to executive branch claims of sweeping authority in this case. Here, hundreds of billions of dollars of tariffs are at stake, with a 10 percent to 12 percent tariff applied to the majority of $4.36 trillion of US imports. The tariffs affect household budgets, inflation, interest rates, relations with US trading partners and allies, and are the focus of the current political controversy over "affordability." The potential costs of retaliation for export-dependent sectors of the US economy would be extensive. In these circumstances, closer judicial scrutiny is warranted.
While the president's earlier use of emergency powers under the International Emergency Economic Powers Act (IEEPA) of 1977 and Section 122 of the Trade Act of 1974 were not subject to review under the Administrative Procedures Act (APA), USTR's factual justification is subject to judicial review to determine whether it is arbitrary and capricious or an abuse of discretion. The courts may well look askance at USTR's extremely tenuous if not contrived factual justifications, which have major gaps and contradictions and appear mainly driven by a desire to reinstate President Trump's 10 percent reciprocal tariffs under IEEPA, as opposed to genuine concerns about forced labor.
Deference to the executive has become more limited. Two attempts at broad tariffs by presidential directive have been ruled to be illegal. This third one is more than a little questionable. The courts will look very closely at it, and it will likely fail.
Justice triumphs, but not immediately and not fully
The Financial Times recently reported that US Customs has managed to refund $100 million of the tariff that was illegally collected from importers pursuant to Trump's emergency April 2, 2025 tariff. Customs is working on reviewing claims for refunds of the other 40 percent of what it took in. This effort is huge and praiseworthy on the part of Customs and the trade court, because it is an enormous undertaking. It also should never have been necessary, because there was no authority to impose the tariff to begin with. It is too early for Customs to begin work on returning the substitute "balance of payments" tariff Trump put into place on February 20, 2026. That process can only begin when the courts finish with appeals of the Court of International Trade's judgment that there was no balance of payments problem under that statute.
The refund of the July 25 "forced labor" tariff is even more distant. Those refunds would depend first on the decision of the Court of International Trade.
There is no full justice to be had. When a tariff is imposed, the importer of record is the party that pays it as a formal matter; that is the most practical and legal avenue for redress. But who actually bears the burden of the tax can only be found out later, through investigating the extent to which the charge was passed on to retailers and consumers through price increases in finished goods or goods with imported inputs. That question is of no concern to the courts or to Customs under US trade laws. As a practical matter, only those who paid can get refunds, and then those in the supply chain are left to work out the best that they can whatever adjustments might be made among them. What we do know from early research, such as that produced by the staff of the Federal Reserve Bank of New York, is that it is mainly American businesses and households that end up with the bill.
Three statutes have already been given an extensively expansive, and erroneous, reading by the administration resulting in an unnecessary and widespread dislocation of American trade. This should not be repeated by an excessive use of the national security authority of Section 232 of the Trade Expansion Act of 1962 and the first, and novel use, of the anti-discrimination authority contained in Section 338 of the (Smoot-Hawley) Trade Act of 1930.
But the first order of business for those involuntarily involved in Trump's tariff campaign, who are paying the tariff now, is to convince three judges at the Court of International Trade that the Trump administration's "forced labor" tariff has no legal foundation. That will happen early this fall. The case will then go up to the US Court of Appeals for the Federal Circuit and very likely to the Supreme Court as well, making this a very long road as major questions need to be resolved. The end is certain, however. This tariff will not stand.
Data Disclosure
This publication does not include a replication package.
*The authors are former General Counsel of the Office of the US Trade Representative who served as senior trade officials in Republican and Democratic administrations during the formative period of the creation and use of Section 301 of the Trade Act of 1974.