Court of International Trade Rules Against Section 122 Tariffs

On May 7th, the U.S. Court of International Trade (CIT) issued a significant ruling striking down the Trump Administration’s 10 percent global tariffs imposed under Section 122 of the Trade Act of 1974. In a 2–1 decision, the court sided with a group of small business plaintiffs, finding that the Administration’s use of Section 122 authority to implement across-the-board tariffs was not justified under the statute.

The tariffs, which went into effect on February 24th, were put in place following the Supreme Court’s earlier decision invalidating the Administration’s prior tariff framework under the International Emergency Economic Powers Act (IEEPA). In response to that ruling, the Administration turned to Section 122, a provision that allows the President to impose temporary tariffs of up to 15 percent for a period of 150 days in response to serious balance-of-payments concerns.

In its decision, the CIT concluded that the economic rationale cited by the Administration—primarily persistent trade deficits—did not meet the statutory threshold required to invoke Section 122 authority. The court emphasized that the provision was not intended to address the type of trade imbalances identified in the Administration’s February order, but rather more specific and acute balance-of-payments crises.

On May 8th, the Trump Administration formally appealed the ruling. Should the decision be upheld through the appellate process, it could require the federal government to refund duties collected under the Section 122 tariffs, mirroring the refund process already underway following earlier court decisions related to IEEPA-based tariffs.

For the premium cigar industry, this development is particularly significant. Premium cigars are almost entirely imported, with the United States relying on countries such as the Dominican Republic, Nicaragua, and Honduras for the vast majority of supply. As a result, broad-based tariffs of this nature disproportionately impact U.S.-based manufacturers, distributors, and retailers, many of which are small, family-owned businesses with no viable domestic alternatives. The invalidation of these tariffs—if ultimately upheld—would alleviate cost pressures across the supply chain and help preserve pricing stability for both retailers and consumers.

In the near term, the ruling introduces uncertainty into the current tariff framework and raises questions about the Administration’s next steps on trade policy. Additional guidance from the Administration and relevant agencies is expected as the situation develops.