'Unauthorized by law': Court says Trump's latest tariffs are 'unlawful' and his 'trade deficit' justification will never work

President Donald Trump has suffered yet another significant loss in a federal court over his power to impose unilateral tariffs.

Late Thursday evening, the U.S. Court of International Trade ruled that the president acted beyond the powers of his office when he imposed limited-duration tariffs under Section 122 of the Trade Act of 1974.

The ruling strikes down a second tranche of "import surcharges" issued by the 45th and 47th president immediately after the U.S. Supreme Court ruled he had no authority to impose "sweeping" tariffs under the International Emergency Economic Powers Act (IEEPA).

Trump's backup tariff plan was announced by way of a proclamation that justified the new levies by citing an ongoing "trade deficit."

In turn, a collection of states, led in part by New York Attorney General Letitia James, insisted Trump "lacks inherent authority to impose tariffs" because "the power to tariff rests with" Congress.

Now, the Manhattan-based court of first instance for global business matters has decisively ruled in the plaintiffs' favor.

"Proclamation No. 11012 is invalid, and the tariffs imposed on Plaintiffs are unauthorized by law," the majority declared.

Under the statute cited by the president, tariffs of up to 15% may be imposed under certain circumstances — but are limited to five months in duration unless extended by Congress.

The plaintiffs, however, argued Section 122 only permits "limited" authority to address "fundamental international payments problems" requiring "special import measures to restrict imports" to deal with "large and serious balance-of-payments deficits."

To hear the states tell it, the "balance-of-payments" language in the statute refers to something entirely different from Trump's cited intention to balance the United States' trade deficit.

"[T]he Section 122 Proclamation focuses on trade deficits," the states' 35-page lawsuit reads. "Contrary to the Section 122 Proclamation, a trade deficit is not a balance of payments deficit. Indeed, Section 122 expressly differentiates between 'balance of payments' and 'balance of trade.'"

The court agreed with the states.

"The Proclamation asserts that 'the United States runs a trade deficit, does not currently make a net income from the capital and labor that it deploys abroad, and experiences more transfer payments, on net, flowing out of the country than into the country,'" the opinion reads. "Nowhere does Proclamation No. 11012 identify balance-of-payments deficits within the meaning of Section 122 as it was enacted in 1974."

In other words, the statute used by Trump only allows the imposition of tariffs in response to "large and persistent" balance-of-payment deficits. But, a balance-of-payments deficit is not the same thing as a trade deficit – which the Trump administration itself acknowledged.

The court further noted that the U.S. is simply not experiencing such a balance-of-payments deficit at present. Notably, the court admits the country likely could not experience such a deficit due to how the modern economy works, but it also dismisses this argument out of hand.

In effect, the court says the idea of a balance-of-payments deficit is an anachronistic measure. Still, this does not matter.

"[W]hen interpreting the statute, we must determine the meaning of 'balance-of-payments deficits' at the time Congress enacted the statute and whether the President identified balance-of-payments deficits within that meaning—regardless of how the [Bureau of Economic Analysis] measures such deficits today," the opinion goes on. "The meaning of this term is readily ascertainable when looking at how the Senate explicitly reported balance-of-payments deficits."

As for a remedy, the court permanently enjoined the tariffs.

"Enjoining unlawful conduct is in the public interest," the opinion continues, giving standing and an injunction to the importers. Washington state, one of the state plaintiffs, was also given standing due to import duties paid by the University of Washington.

While the court's findings are clear, the upshot might be less so.

The trade court expressly declined to enter a universal injunction – meaning the reach of Thursday's ruling, at least for now, will be limited. It is not immediately clear whether or how the ruling could apply to other similarly situated parties who have paid the unlawful duties.

"Once again, the courts have made clear that the president cannot unilaterally rewrite our trade laws to suit his political agenda," James said in a statement welcoming the victory. "Limitless tariffs were unlawful the first time, and changing the label did not make them any less illegal the second time."