The U.S. Court of International Trade on Wednesday heard arguments in a major legal challenge to President Donald Trump’s latest round of tariffs, with businesses and 25 states arguing that the administration exceeded the authority granted to the executive branch by Congress.

The case concerns tariffs imposed on goods from 60 trading partners, including the European Union and China, after the Trump administration accused those countries of failing to prevent goods produced with forced labour from entering international supply chains.

At the heart of the dispute is whether the administration lawfully used Section 301 of the Trade Act of 1974 to impose what amounts to a broad tariff regime covering more than 99% of U.S. imports.

Businesses and States Challenge the Tariffs

Four small businesses and 25 Democratic-led states have challenged the tariffs before the trade court. The plaintiffs argue that Section 301 does not give the president unrestricted authority to impose tariffs across virtually the entire global trading system. Instead, they contend that the statute requires the government to identify specific unfair trade practices by individual countries and establish the legal basis for imposing duties in response.

Attorney Pratik Shah, representing two of the small businesses involved in the litigation, argued that the administration had relied on a statutory power that Congress intended to be carefully limited. According to the plaintiffs, the administration moved too quickly and failed to make the country-specific findings required under the law before imposing the duties.

The lawsuit does not dispute the existence or seriousness of forced labour as an international problem. Rather, it assesses whether combating forced labour gives the executive branch the statutory authority to impose tariffs on such a broad range of countries and products.

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Tariffs Cover Nearly the Entire Import Market

The tariffs were introduced in late July at rates ranging from 10% to 12.5%. They apply to goods from 60 major U.S. trading partners and collectively cover approximately 99.4% of U.S. imports, although several products are exempt. The administration has defended the measures as part of its effort to combat forced labour in global supply chains.

U.S. Trade Representative Jamieson Greer said when the tariffs were announced that the United States had maintained a longstanding prohibition on imports made with forced labour and argued that other trading partners should adopt and enforce similar restrictions.

The administration's position is that its Section 301 investigations established that the affected economies had failed to adequately prevent imports produced with forced labour.

The Legal Authority Behind the Tariffs

Section 301 of the Trade Act of 1974 permits the United States to respond to certain foreign acts, policies or practices that are considered unreasonable or discriminatory and that burden U.S. commerce. The plaintiffs argue that the provision does not authorise the government to establish a near-universal tariff schedule based on a generalised finding applicable to dozens of countries.

Three separate lawsuits challenging the tariffs have been consolidated before the Court of International Trade. The plaintiffs contend that the administration's approach effectively transforms Section 301 into a broad presidential tariff power that Congress did not intend to delegate.

The administration, however, maintains that it conducted investigations into the affected countries' policies concerning forced-labour imports and determined that tariffs were warranted against each of them.

Case Follows Supreme Court Tariff Ruling

The litigation comes months after a significant ruling by the U.S. Supreme Court concerning Trump's earlier tariffs. On February 20, the Supreme Court ruled that Trump could not rely on the International Emergency Economic Powers Act (IEEPA) to unilaterally impose broad tariffs on U.S. trading partners.

The decision limited the administration's attempt to use emergency economic powers as the legal basis for sweeping tariffs. Following that ruling, the administration imposed a temporary 10% global tariff under another statute. When that measure expired, the administration turned to Section 301 and introduced the forced-labor tariffs now before the trade court.

The plaintiffs argue that the change in statutory authority does not cure the underlying legal problem because, in their view, the administration is still attempting to exercise tariff powers that Congress has not granted.

Three-Judge Panel to Decide the Case

The arguments are being heard by a three-judge panel of the Court of International Trade comprising judges appointed by Presidents Trump, Barack Obama and Joe Biden. The panel is not expected to issue an immediate ruling from the bench. As an alternative, the court is expected to release a written decision following the hearing.

Source: Reuters