Federal Trade Court Strikes Down Trump's 10% Global Tariff in Burlap and Barrel Ruling, Orders Refunds

NEW YORK — A three-judge panel of the U.S. Court of International Trade ruled 2-1 on Thursday that President Donald Trump's 10% global import tariff is unlawful, dealing the administration its second major courtroom defeat on trade in three months and ordering the government to refund duties already collected from the plaintiffs, with interest. The opinion, in Burlap and Barrel Inc. v. Trump, found that Trump had no authority under Section 122 of the Trade Act of 1974 to impose the across-the-board levy he announced in February, after the Supreme Court invalidated his earlier emergency-powers tariffs.

The majority opinion was joined by two judges appointed by President Barack Obama; the dissent came from a judge appointed by President George W. Bush. The court rejected the administration's argument that a chronic U.S. "trade deficit" qualifies as the kind of "large and persistent balance-of-payments deficit" that Section 122 requires before a president may impose temporary import surcharges. "Defendants do not explain why they should be permitted to continue the unlawful collection of Section 122 duties from Importer Plaintiffs for the duration of the imposition of such duties," the majority wrote, ordering an immediate halt to enforcement against the named plaintiffs.

Those plaintiffs include Burlap and Barrel, a Brooklyn-based importer of single-origin spices that says the tariff has cost it more than $400,000 since February, a separate small-business co-plaintiff, and the state of Washington — one of 24 states whose attorneys general joined the suit when it was filed in March. The court did not extend the injunction nationwide, leaving the 10% tariff in place for other importers pending appeal. Department of Justice lawyers filed a notice of appeal at the Court of International Trade on Friday, signaling that the case will move next to the U.S. Court of Appeals for the Federal Circuit.

The ruling is the second time this year that courts have rejected Trump's tariff regime. In a January decision, the Supreme Court struck down his earlier reliance on the International Emergency Economic Powers Act to impose duties of as much as 50% on imports from China, Mexico and the European Union. Trump responded in February by invoking Section 122 — a Nixon-era provision designed for short-term, capped surcharges of up to 15% for no more than 150 days — and applying it indefinitely to virtually every country with which the United States runs a trade surplus or deficit.

Reaction inside the administration was sharp. "Nothing surprises me with the courts," Trump told reporters on the South Lawn before boarding Marine One on Friday, calling the panel's two majority judges "radical left" and pledging that his team would find "another way" to keep the tariff structure intact. Treasury Secretary Scott Bessent, briefing reporters at the White House Friday afternoon, said the government has already begun processing refund requests through a new portal launched this week and that checks are not expected to start going out until later in the summer. As of Friday, the Treasury had collected an estimated $147 billion under the disputed 10% rate.

Business groups celebrated the ruling. The U.S. Chamber of Commerce, which had filed an amicus brief, called it "a victory for every American small business that has been forced to absorb a tax it should never have been asked to pay." But importers warned that the appeal could drag on for months. Trump on Tuesday set a July 4 deadline for the European Union to accept his reciprocal trade framework, with an automatic snap-back to 25% tariffs on European autos if Brussels balks — a deadline that, lawyers said, the new ruling does not directly affect.