Trump Tariff Losing Streak: CIT Strikes Down Worldwide 10 Percent Tariffs

Key Takeaways

• The US Court of International Trade (CIT) invalidated the Trump Administration’s use of Section 122 to impose worldwide 10% tariffs.  This follows the Supreme Court striking down President Trump’s IEEPA-based tariffs in February 2026.
• Section 122 tariff refund rights are currently limited to the plaintiffs, and the Administration has appealed the decision.
• Section 122 tariffs will continue to be collected from other importers, pending further litigation.  
• Companies should carefully consider their contractual, compliance, and litigation positions in light of the rapidly shifting international trade environment. 

The CIT Rules Trump’s Section 122 Tariffs Unlawful. President Trump instituted worldwide 10% tariffs under Section 122 of the Trade Act of 1974 just hours after the US Supreme Court ruled on February 20, 2026 that the Trump Administration’s IEEPA-based tariff measures were unlawful.  These Section 122 tariffs, which effectively acted as a temporary and partial replacement for the overruled IEEPA-based tariffs, were quickly challenged in court. On May 7, 2026, the CIT invalidated the Administration’s new Section 122 tariffs in Burlap & Barrel, Inc. v. United States.  The CIT’s decision is somewhat narrow in scope and has been appealed, so further litigation is likely before the courts open the door to Section 122 tariff refunds.  

Why did the CIT strike down the Section 122 tariffs?  The CIT held that Section 122 tariffs were unlawful because statutory preconditions were not met. Section 122 authorizes temporary import restrictions, including tariff measures, only where there are “large and serious United States balance‑of‑payments deficits.”  By contrast, the Trump Administration cited current trade deficits to justify the Section 122 tariffs.

The CIT held that the present circumstances do not constitute “large and significant… balance-of-payments deficits” as referred to under the statute.  The majority in the CIT decision rejected the Administration’s argument that the term should evolve to encompass modern macroeconomic measures.  The majority held that allowing such evolution of the statute’s language would give the president unbounded tariff authority under Section 122 and raise constitutional concerns.  Accordingly, the proclamation relied on the “wrong” type of deficit and was therefore not authorized by Section 122.  The dissenting judge, however, agreed with the Trump Administration’s position on the evolution of Section 122.

Will Importers Get Section 122 Tariffs Refunded?  For now, the CIT only ordered the payment of refunds to the plaintiffs in this case.  As such, all other importers that paid Section 122 tariffs that the CIT has held are unlawful are not currently entitled to relief as an immediate result of this decision. The refund process continues to develop for the IEEPA-based tariffs that the Supreme Court struck down earlier this year and could be a model for future Section 122 tariff refunds.  For example, in a March 4, 2026, decision, the CIT ordered US Customs and Border Protection (CBP) to refund unlawful IEEPA-based tariffs that have been collected. This resulted in CBP building an automated tariff refund processing system, the Consolidated Administration and Processing of Entries (CAPE) system.  Future litigation could potentially result in the use of the CAPE system for Section 122 tariff refunds as well.

In addition to potential litigation at the CIT to pursue individual Section 122 tariff relief, importers might also eventually consider filing protests with CBP for entries beyond CBP’s 90-day voluntary liquidation period but not yet beyond the 180-day time limit. This could ultimately prevent liquidation of entries becoming final, which could potentially delay or complicate a possible future refund process. 

Who Gets the Tariff Refund?  The new CIT ruling highlights a practical issue for companies in today’s trade landscape: who should ultimately get to keep a tariff refund?

CBP’s CAPE system is designed to issue refunds to only the “importer of record” for affected entries. It is becoming increasingly important for companies to consider how contract provisions could impact the potential right for a non-importer to receive some portion of the importer of record’s tariff refunds.  Accordingly, for example, companies might consider proactively assessing and updating contract language to explicitly address whether a customer should be entitled to some of the tariff refund collected by a supplier that acted as the importer of record and passed the tariff cost on to the customer. 

Conclusion. The latest tariff decision signals continued uncertainty as the Administration’s trade agenda evolves.  In this shifting landscape, companies should proactively reassess risk exposure, preserve potential refund rights, and align commercial strategies to address the evolving tariff landscape.