States Sue to Stop Trump From Reviving Steep Tariffs

The lawsuit filed by two dozen attorneys general seeks to invalidate the president’s new, 10 percent global tax on imports.

A coalition of two dozen states sued President Trump on Thursday over the new 10 percent tariff that he has imposed on imports from around the world, a move that will send the administration back to court to defend the legality of its punishing trade war.

The lawsuit, led by the Democratic attorneys general from Oregon, New York, California and Arizona, claimed that Mr. Trump did not have the power to impose that tax and “sidestep” the Supreme Court, which delivered the administration a stunning blow last month when it struck down the president’s original slate of withering duties.

The legal challenge marked the latest twist in a saga that has engulfed Mr. Trump’s second-term economic agenda, which hinges on the unfettered use of tariffs to reorient global trade, bolster domestic manufacturing, project geopolitical influence and raise billions of dollars in revenue. That money, totaling more than $100 billion, has been the subject of a separate bout of legal warfare, as a rapidly widening roster of businesses clamor for refunds that the administration has been unwilling to provide.

But Mr. Trump and his top aides have remained unfazed despite the intensifying opposition. Even after the Supreme Court choked off their primary tool to wage trade war in late February, the administration almost immediately insisted it would simply turn to a stable of other authorities to forge ahead with its wide-ranging ambitions.

“The president has made clear that he is going to impose worldwide tariffs by any means necessary,” the states charged in their lawsuit, as they faulted Mr. Trump for what they described as “an exercise of completely unrestrained executive power.”

The White House did not respond to a request for comment.

Initially, the president had relied on decades-old economic emergency law to impose his country-by-country tariffs without the approval of Congress, until a majority of the justices invalidated that approach. Now, Mr. Trump has turned to another little-known law, Section 122 of the Trade Act of 1974, which allows him to institute tariffs of up to 15 percent for 150 days.

The rate is currently set at 10 percent, though the president has said he intends to raise it to the maximum of 15 percent as soon as this week.

Until Mr. Trump, no president had ever invoked Section 122, a provision that Congress enacted to address issues with the nation’s “balance of payments,” or the record of all goods, services, money and other assets that flow in and out of the country. But Mr. Trump justified his novel action in late February by pointing partly to another metric, the nation’s trade deficit, saying that the persistent gap between U.S. exports and imports warranted an immediate response.

As a result, state officials sued the Trump administration in the U.S. Court of International Trade, arguing on Thursday that Mr. Trump had not met the criteria to invoke Section 122, ultimately inflicting financial harm on local residents and businesses.

The states pointed to the administration’s own previous comments, which had acknowledged that a balance-of-payments problem is different from one involving the nation’s trade deficit. And they accused the White House of “cherry picking” its data in order to conform its tariffs to the requirements under the law.

“It is an archaic statute that was never intended for its current purpose as used by the Trump administration,” Dan Rayfield, the Democratic attorney general of Oregon, said during a news conference on Thursday.

Many economists agree that the United States does not have an imbalance in payments, a primary concern in the long-abandoned days when the U.S. dollar was tied to gold. Such a problem would occur only if the country could not afford to pay its foreign creditors — the kind of problem the United States nearly faced in the early 1970s, shortly before the law was written.

In their lawsuit, the states took further issue with the fact that Mr. Trump had moved to spare a long list of products, and even some countries, from his new 10 percent tax on imports. They said the law did not allow for these exceptions, which the president first put in place last year in a tacit recognition that his earlier duties could cause consumer prices to rise.

Among the states to sue were Colorado, Illinois, Maine, Maryland, Pennsylvania, North Carolina and Virginia. For some, it was their second attempt to thwart Mr. Trump’s tariffs. Oregon previously led a coalition of states in one of the cases challenging the president’s original roster of duties, in an effort that prevailed at the trade court last year and in front of the Supreme Court months later.

If Mr. Trump were to lose the newest case, it could force the administration to refund money collected under the 10 percent tariff. That could prove to be a hefty sum: If the tax is maintained for the full 150 days, it could generate about $35 billion in revenue, according to the Committee for a Responsible Federal Budget, which supports deficit reduction.

Mr. Trump already faces the prospect that he may have to return a far larger amount — more than $100 billion — collected from his previous tariffs now that they have been declared illegal. The administration has already fought those demands for repayment, prompting widespread criticism among the states, who said it could factor into judges’ thinking as they evaluate the latest lawsuit.

But the fight is still likely to look much different from the recent legal wrangling over Mr. Trump’s previous strategy, which relied on the International Emergency Economic Powers Act. That law did not even mention tariffs, and no president before Mr. Trump had ever used it to impose them, creating a host of novel legal issues for the courts to resolve.

With Section 122, by contrast, the law clearly allows for tariffs, but it is the president’s justification for them that is subject to dispute. As a result, many legal experts remain torn on whether judges may be inclined to afford Mr. Trump more discretion to determine the economic conditions that might justify his duties.

“The stability of our economy is more than just a political talking point,” said Letitia James, the Democratic attorney general of New York. “That is why we are asking a court to declare these tariffs unlawful.”

Still, the Trump administration has openly described its across-the-board tariffs as a temporary fix, which would buy time for the government to pursue more lasting duties under another provision of trade law known as Section 301. That power permits the president to tax imports from countries that engage in unfair trade practices, but only after the government completes a lengthy investigation.

Mr. Trump has used this power, which is more legally settled, to impose tariffs on China dating back to his first term. Many similar inquiries are now underway, leading Scott Bessent, the Treasury secretary, to conclude this week that the administration is on track to recapture the size and scope of the duties that the Supreme Court recently deemed illegal.

“It’s my strong belief that the tariff rates will be back to their old rate within five months,” Mr. Bessent told CNBC.

Ana Swanson contributed reporting.

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