Trump's 10% global tariffs are ruled invalid again, and tariffs on China may be reduced by another 10%

The U.S. Court of International Trade (CIT) ruled on May 7, local time, that the 10% global import surcharge implemented by the Trump administration in accordance with Section 122 of the Trade Act of 1974 "lacked legal basis" and was an administrative overstep. This is another major legal setback for the White House to invoke alternative legal tools after the U.S. Supreme Court previously rejected the so-called "reciprocal tariffs" and "fentanyl tariffs."

Since the 10% tax rate applies to the vast majority of trading partners, including China, the industry generally expects that this move means that the actual tariff burden of the United States on China is expected to be reduced by another 10 percentage points, bringing some relief to the ongoing tight global trade situation.

In February this year, the U.S. Supreme Court ruled that the large-scale "reciprocal tariffs" and "fentanyl tariffs" implemented by the Trump administration in accordance with the International Emergency Economic Powers Act (IEEPA) were not authorized by Congress and were illegal taxes.

In order to maintain a high-pressure tariff stance, the White House quickly turned to Article 122 of the Trade Act of 1974 and announced on February 20 a unified 10% tariff on all imported goods, which will be effective for 150 days and will be officially implemented around February 24, covering major trading parties such as China, the European Union, Japan, Mexico, and India.

However, in a 2-1 vote, three judges of the U.S. Court of International Trade found that the government's invocation of Section 122 was not justified. The court pointed out that the trade deficit and other reasons cited by Trump were not enough to constitute a "serious balance of payments crisis" required by the law, and the president did not have the authority to implement comprehensive tax increases on global goods based on this. The ruling made clear that the tariffs were "unauthorized by law" and therefore invalid.

Currently, the ruling only applies to the plaintiffs who filed the lawsuit - two U.S. import companies and the Washington state government. The court temporarily prohibited the government from continuing to impose 10% tariffs on these plaintiffs and required the refund of taxes and interest paid. Other importers not involved in the lawsuit still need to pay taxes according to the original policy.

However, the legal community generally believes that this judgment has formed a key precedent, and more companies will follow suit and file lawsuits in the future. Once more courts adopt the same logic, the U.S. government will face tremendous pressure for tax refunds.

The Trump administration is expected to immediately appeal to the U.S. Court of Appeals for the Federal Circuit (CAFC). However, it is worth noting that the Article 122 tariff itself has a natural validity period of 150 days. Unless extended by Congress, it will automatically expire around July 24, 2026. Therefore, even if the litigation proceeds, the relevant tariffs may expire on their own before a final ruling.

Although the 10% global tariff has encountered judicial obstruction, the United States' trade pressure tools have not stopped. The Office of the United States Trade Representative (USTR) has launched a large-scale Section 301 investigation to examine more than 60 major trading partners, including China, the European Union, Japan, India, and Mexico, on issues such as "structural overcapacity" and "forced labor products," covering more than 99% of the sources of U.S. imports. The industry generally expects that the U.S. government is trying to quickly establish a new tariff system through Section 301 to fill the policy gap before the 10% global tariff expires. The long-term tone of global trade friction has not changed.

The IEEPA tariffs, which were previously ruled illegal by the Supreme Court, have recently entered the refund implementation stage. The U.S. Customs and Border Protection (CBP) has launched a special tax refund system, and importers and customs brokers can submit applications. The first batch of refunds is expected to arrive around May 11, covering the previously levied "reciprocal tariffs" and "fentanyl tariffs" and including interest. However, if the government continues to appeal or introduces alternative tariff measures, the refund process may still face delays.

For Chinese export companies, this ruling is expected to alleviate some of the tariff pressure in the short term. If the 10% global tariff is eventually officially lifted, U.S. importers' costs will fall, especially low-margin, price-sensitive products may benefit, and some orders suspended due to tariff uncertainty are expected to resume.

However, industry insiders also reminded that the US government can still maintain the ability to increase taxes through Section 301 and Section 232, and the long-term trend of Sino-US trade friction has not been reversed. Foreign trade companies should continue to track U.S. policy developments, while accelerating the deployment of alternative markets such as Southeast Asia, the Middle East, and Europe to reduce the risk of dependence on a single market.