Will Third Tariff Regime Charm the Courts?

If at first you don’t succeed, try, try again. That can-do sentiment could serve as the tagline for the administration’s newest tariff regime, which took effect on July 24.

Acting under the Trade Act of 1974, the U.S. Trade Representative imposed additional duties of 10% or 12.5% on goods from 60 economies, covering 99.4% of U.S. imports by value. (Our number counts the European Union as a single economy; some press accounts have pegged the country count above 80.) The administration’s stated justification is that these trading partners have failed to enforce bans on importing goods made with forced labor.

The timing of the new tariffs is noteworthy. The Supreme Court struck down the so-called “Liberation Day” tariffs back on February 20, holding that the International Emergency Economic Powers Act never authorized them. Within hours, the president rolled out a temporary 10% global tariff under Section 122 of the same 1974 statute, an authority that came with a 150-day expiration period. Those duties lapsed at 12:01 a.m. on July 24. The Section 301 duties took effect at that same minute.

Importers noticed. Hours after the switch, two small businesses filed a proposed class action in the U.S. Court of International Trade, backed by the nonprofit legal group Liberty Justice Center, behind the successful IEEPA challenge. Their complaint argues that the new action was “designed to preserve substantially the same broad tariff regime” the courts had already rejected, and that Section 301 of the Trade Act confers no freestanding power to tax nearly all imports from nearly all trading partners at rates picked to replicate an invalidated program. Toymaker Learning Resources filed a separate suit the same day.

The plaintiffs also lean on history. Past presidents have reached for Section 301 plenty of times, though always to target particular countries and industries. Stretching it across the entire import base has no precedent, the suit argues, also claiming that the country-specific findings behind it are too thin.

Administration officials have rejected the idea that the new duties are a workaround, saying labor practices have been a focus since President Trump’s first term. The legal footing may also be sturdier this time. Section 301 has long offered a more established legal basis for trade remedies than IEEPA or the balance-of-payments authority in Section 122, and here USTR ran the statutory process before acting, opening 60 investigations in March and building a record of hearings and more than 1,600 public comments before issuing findings in June. That record, Morgan Lewis wrote, “may strengthen its defense against procedural challenges.”

The reach is still what stands out. Imposing duties on 60 economies at once is unprecedented, Ashurst Perkins Coie noted, since the earlier Section 301 tariffs that courts allowed to stand were far narrower in scope. Morgan Lewis made a related point: the new program taxes products without requiring any direct connection between a given import and forced labor.

Others doubt it will survive review. In commentary published by the Peterson Institute for International Economics the day before the duties took effect, Alan Wm. Wolff argued that “Congress did not delegate authority of such breadth to the [P]resident” and predicted the Supreme Court would overturn the tariffs if challenged. He also pointed to a feature of the tariff structure itself that undermines that rationale: sorting 60 economies into just two rate buckets cuts against the idea that the new tariffs have been calibrated to actual conduct.

Trading partners, meanwhile, have disputed the forced labor findings while generally refraining from immediate retaliation. The European Commission noted approvingly that the outcome tracks the tariff caps agreed in the EU-U.S. joint statement. Switzerland rejected the underlying allegations while acknowledging that Washington stayed within its 12.5% ceiling.

Two partners have gone further. Brazil requested WTO dispute consultations, with the request circulated to members on July 30. China’s Ministry of Commerce called the action “a textbook act of unilateralism and protectionism” while signaling it will hold off on retaliation for now, since the 12.5% rate sits inside a ceiling the administration promised in earlier talks.

The whiplash is already surfacing in the filings companies are making right now. In its 10-Q filed July 31, Apple walked investors through the sequence, from the Supreme Court striking down the IEEPA tariffs and its own applications for refunds of duties already paid to “the recent imposition of tariffs under Section 301 of the Trade Act of 1974,” with the caveat that “further changes could be made in the future.” Baxter International, filing a day earlier, booked roughly $75 million in tariff refunds and told investors it expects results to “continue to be adversely impacted by Section 122 duties and recently announced Section 301 tariffs.”

The administration is on its third tariff regime in less than two years, and the Court of International Trade has rejected the first two. For public companies, the practical takeaway is that tariff disclosures should account not only for current costs, but also for the possibility of further judicial, administrative and policy changes. Issuers may need to revisit assumptions about tariff exposure, refund recoveries, supply-chain effects, and forward-looking estimates as the litigation develops.

Clear disclosure of both current impacts and the uncertainty surrounding future tariff policy will be important for helping investors understand how these rapidly changing rules could affect financial results.

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