Federal Circuit Stays Enforcement of Ruling Against Trump's Section 122 Tariffs

Key Takeaways

• Federal Circuit paused enforcement of CIT's injunction on Section 122 tariffs
• Stay applies only to Washington and two small importers, not all trade
• Court questioned balance‑of‑payments definition, hinting at broader presidential tariff power
• Potential irreparable harm to importers could persist for months during appeal

Pulse Analysis

Section 122 of the Trade Act of 1974 gives the president authority to impose up to a 15 percent tariff for 150 days when a “balance‑of‑payments deficit” threatens the U.S. economy. In May, the Court of International Trade (CIT) ruled that the Trump administration’s 10 percent tariff on a broad swath of imports failed to meet that statutory trigger, issuing an injunction that halted collection for the state of Washington and two small importers. The decision echoed the Supreme Court’s earlier repudiation of the IEEPA tariffs, reinforcing judicial skepticism toward expansive executive trade powers.

On June 11, the Federal Circuit issued a limited stay, effectively reinstating the tariff collection while the appeal proceeds. The panel’s brief opinion sidestepped a deep analysis of what constitutes a “balance‑of‑payments deficit,” suggesting the government’s narrower reading might be correct. Critics argue that this interpretation could grant the president near‑unlimited authority to levy Section 122 tariffs, raising serious nondelegation and major‑questions concerns. Importers forced to pay the tariffs now face immediate price hikes, strained supplier relationships, and lost sales—harms that refunds cannot fully remedy, especially given the sluggish $20.6 billion refund pace seen after the IEEPA case.

The stay does not resolve the merits, and a different panel—or an en banc hearing—could overturn the ruling. If the appellate court ultimately upholds the CIT’s view, Section 122 tariffs may be permanently curtailed, restoring predictability for businesses that rely on imported inputs. Conversely, a reversal could embolden future administrations to invoke Section 122 more aggressively, reshaping U.S. trade policy and prompting states to challenge tariffs in court. Market participants should monitor the appellate timeline, as prolonged uncertainty may affect import‑dependent sectors ranging from electronics to automotive components.