News / US importers challenge new tariffs as economists warn Section 122 is 'wrong tool'

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A fresh legal challenge to the US administration’s use of tariff powers is gathering momentum at the Court of International Trade (CIT), raising the prospect that importers could see another round of refunds. 

The case was brought last week by a coalition of US states in State of Oregon v. Trump, where a group of economists has also weighed in with an amicus brief arguing that the law is being misapplied. 

“The conditions that Section 122 was designed to address are not present today,” the economists told the court, adding that the provision “was enacted to address problems that arise under a system of fixed exchange rates”. 

They warned that “using Section 122 in these circumstances is inconsistent with its purpose”, reinforcing the plaintiffs’ argument that the administration is relying on the wrong legal tool. 

Director of global trade advisory services at Baker Tilly Pete Mento noted: “The entire argument hinges on a ‘balance of payments deficit’. The problem is, that’s not what the US has. We have a trade deficit. That’s normal. That’s been normal for decades. Calling that an emergency is like calling your mortgage a liquidity crisis.

“If this logic holds, then any trade deficit becomes a reason to act. And suddenly ’emergency tariffs’ aren’t an exception – they’re just another tool in the box.”

It’s the second case of its type: in Burlap & Barrel v. Trump, filed in March, a group of importers is seeking to block tariffs imposed under Section 122 of the Trade Act of 1974, arguing the measure is being used far beyond its intended scope. 

The plaintiffs, who include spice importer Burlap & Barrel and toy company Basic Fun, contend that Section 122, originally designed to address short-term balance-of-payments crises, cannot lawfully justify broad-based tariffs in today’s economic environment. They are asking the court not only to halt the duties, but also to declare them unlawful and order refunds of tariffs already paid. 

Together, the cases mark the latest front in an escalating legal battle over the administration’s use of emergency and quasi-emergency tariff authorities, and come as importers are already fighting to recover billions of dollars from an earlier set of duties struck down by the courts. 

Trade lawyers say the new Section 122 cases could ultimately follow a similar trajectory. 

If the CIT finds the tariffs unlawful, importers that have paid the duties would likely seek refunds, potentially setting up another complex and politically sensitive repayment process. 

However, the litigation remains at an early stage, and any decision is likely to be appealed, meaning companies could face months or years of uncertainty before clarity emerges. 

In the meantime, importers are taking a more cautious approach, with many lodging protests and closely tracking entries in anticipation of a possible repeat of the refund battles now under way.