Analysis: States Challenge New Section 122 Tariffs

Today, a coalition of more than twenty states filed a new lawsuit in the U.S. Court of International Trade challenging the Trump administration’s latest tariff program.

The case—State of Oregon v. Trump—targets the administration’s new attempt to impose tariffs under Section 122 of the Trade Act of 1974, after the Supreme Court recently invalidated the earlier tariffs imposed under the International Emergency Economic Powers Act (IEEPA). A copy of the complaint is available here.

The lawsuit is the first major challenge to the administration’s new tariff authority and could become the central litigation over the current tariff program.

Background

On February 20, 2026, the Supreme Court held that the President lacked authority under IEEPA to impose tariffs.

Later that same day, the administration announced a new tariff program under Section 122, imposing a 10 percent tariff on most imports, with plans to increase the rate to 15 percent.

Section 122 has existed since 1974 but has never previously been used to impose tariffs. 

The statute allows temporary import restrictions only in narrow circumstances—primarily when the United States faces “large and serious balance-of-payments deficits.” 

The States’ Legal Arguments

The complaint argues that the administration’s use of Section 122 exceeds the authority granted by the statute. Unlike the IEEPA litigation, the plaintiff states do not contend that Section 122 does not authorize tariffs at all. Instead, they argue that the statutory conditions under which tariffs may be imposed have not been satisfied.

1. No balance-of-payments crisis

The states argue that the administration relied primarily on the U.S. trade deficit, which is only one component of the balance of payments. According to the complaint, a trade deficit alone does not constitute a balance-of-payments deficit. 

The complaint asserts that once capital and financial flows are included, the United States’ overall balance-of-payments position is close to zero and does not resemble the type of crisis contemplated by the statute. 

2. A statute designed for a different monetary system

The complaint also argues that Section 122 was designed for the fixed-exchange-rate system that existed prior to the mid-1970s. Under today’s floating exchange-rate system, the states argue that the type of balance-of-payments crisis contemplated by the statute is unlikely to arise in the same way.

3. Failure to comply with other statutory limits

The lawsuit also argues that the tariff program violates additional statutory constraints, including requirements that tariffs be applied in a broadly uniform and nondiscriminatory manner. The proclamation includes numerous country-specific and product-specific exceptions that the states argue are inconsistent with those statutory limits.  

What the States Are Asking the Court to Do

The states ask the Court of International Trade to:

• declare the tariffs unlawful;

• block their enforcement;

• vacate Customs’ implementation of the tariffs; and

• order refunds of tariffs already collected. 

Implications for Importers

The lawsuit could determine whether the administration’s new tariff program ultimately survives judicial review.

However, even if the tariffs are eventually invalidated, the refund process will likely involve a number of procedural steps. Those steps will occur within Customs and Border Protection and in the Court of International Trade. Importers are currently navigating those procedural steps regarding refunds of the IEEPA tariffs that the Supreme Court already held were unlawful.

For that reason, many companies are continuing to evaluate whether they should take steps to preserve potential refund rights while the litigation proceeds.

— Matthew A. Seligman, Principal, Grayhawk Law