US Court Blocks Section 122 Tariffs, Relief for Indian Firms Not Immediate

The United States Court of International Trade on May 7 struck down President Trump’s 10% global tariffs imposed under Section 122 of the Trade Act of 1974, less than 50 days after they were introduced on February 20.  With both the reciprocal tariffs and the Section 122 tariffs now invalidated by courts, the US tariff system is largely returning to its pre-Trump structure based on standard Most-Favoured-Nation tariff rates under the WTO framework.

Section 122, allows the president to impose import tariffs of up to 15% for a maximum of 150 days without congressional approval to deal with serious balance-of-payments difficulties. The tariffs had been imposed on February 20, 2026, few hours after the Supreme Court of the United States struck down reciprocal tariffs.

The United States Court of International Trade, in a 2–1 ruling on May 7,  said the Trump administration had gone beyond the powers given by Congress under Section 122 of the Trade Act of 1974. The court called the tariffs “invalid” and “unauthorized by law,” saying the law was meant for balance-of-payments emergencies, not for broad tariffs aimed at cutting trade deficits.

However, the decision currently applies only to the parties that filed the case — the state of Washington, spice importer Burlap & Barrel, and toy maker Basic Fun!

The tariffs will continue for other importers while the US government appeals the ruling. The court chose not to block the tariffs nationwide at this stage. The court limited relief to the litigants before it rather than issuing a nationwide injunction, a practice sometimes followed by US courts in politically-sensitive disputes involving executive authority.

The Trump administration is expected to appeal immediately before the United States Court of Appeals for the Federal Circuit, while the petitioners are likely to seek broader nationwide applicability of the ruling.

The case could eventually return to the Supreme Court, extending uncertainty around the administration’s trade strategy.

The Section 122 tariffs were on weak legal footing because the law was originally enacted to deal with serious balance-of-payments crises and persistent dollar outflows. However, since 1973 the United States has operated under a free-floating dollar system, where trade imbalances are adjusted through exchange rates and global capital flows rather than import restrictions. The US continues to run large trade deficits while still attracting massive foreign investment because the dollar remains the world’s dominant reserve currency.

Future Trade Tools

Both the reciprocal tariffs imposed under IEEPA and the later Section 122 tariffs were on legally weak footing, which is why courts struck them down. The US administration has effectively been playing a cat-and-mouse game — using one legal provision to impose broad tariffs, and when courts block it, shifting to another questionable legal tool. Such uncertain tariff regime in world’s largest market creates uncertainty for businesses, disrupt global supply chains, and raise costs for manufacturers and consumers.

With courts striking down both the reciprocal tariffs and the Section 122 tariffs, the Trump administration is now expected to rely more on targeted trade measures such as Section 301 investigations and Section 232 national-security tariffs. These tools could be used against partner countries for sectors like steel, semiconductors, automobiles, pharmaceuticals, and critical minerals.

The legal uncertainty around US tariffs is also affecting trade negotiations. Malaysia has already walked away from its trade deal with the US, while several other countries are rethinking trade deal with the US.

India Stance