The US Court of International Trade ruled 2-1 on May 7 that President Donald Trump’s 10% global tariff imposed under Section 122 of the Trade Act of 1974 is illegal, blocking a key pillar of the administration’s trade architecture less than three months after it took effect on February 24.
The decision came one day after the Lula-Trump White House meeting set a 30-day bilateral working group on tariffs and a Section 301 investigation against Brazil, with relief granted only to plaintiffs Burlap and Barrel (NY spice importer), Basic Fun (Florida toy company), and Washington state. The administration is expected to appeal to the US Court of Appeals for the Federal Circuit.
Key Points
— US Court of International Trade ruled 2-1 against Section 122 tariffs on May 7.
— 10% global tariff in effect since February 24; due to expire July 26 anyway.
— Plaintiffs Burlap & Barrel + Basic Fun! + 24-state coalition led by Washington.
— Relief narrow: only granted to companies and Washington state — no universal injunction.
— Appeal expected at US Court of Appeals for the Federal Circuit; Supreme Court possible.
The Ruling
The Rio Times, the Latin American financial news outlet, reports that the three-judge panel of the US Court of International Trade in New York held that Trump’s February 20 executive order failed to identify “balance-of-payments deficits within the meaning of Section 122 as it was enacted in 1974”, concluding the order was “invalid” and the tariffs imposed on plaintiffs were “unauthorized by law”. Section 122 of the Trade Act of 1974 permits temporary import surcharges of up to 15% for up to 150 days, but only to address balance-of-payments deficits or imminent dollar depreciation, neither of which the administration could demonstrate. Judge Timothy Stanceu dissented, arguing the statute allows the president to amend tariffs based on his own findings about specific economic conditions in the United States.
The case (filed under the name Burlap and Barrel v Trump) was lodged March 9 by the Liberty Justice Center, the same firm that prevailed in the IEEPA-tariff Supreme Court ruling earlier in 2026, with oral arguments heard in April. The other 23 state attorneys general from a parallel challenge were ruled to lack standing because they did not pay tariffs directly, narrowing the practical impact of the ruling.
Brazilian and LATAM Implications
For Brazil, the ruling lands at a delicate moment: April 2026 trade data showed Brazilian exports to the US down 11.3% year-on-year directly attributable to the tariffaço, while the May 7 Lula-Trump White House meeting set a 30-day working group expected to deliver a bilateral proposal around June 6. Steel and aluminum tariffs at 25% remain in effect under Section 232 (separate authority not affected by this ruling), and Brazil continues to face a parallel Section 301 investigation. For other LATAM exporters such as Mexico, Colombia, Chile, and Peru with significant US trade exposure, the ruling potentially weakens the Trump administration’s leverage in pending bilateral negotiations heading into the July 26 Section 122 expiry date.
What Comes Next
The administration is expected to appeal to the US Court of Appeals for the Federal Circuit (the same court that ruled against IEEPA tariffs in 2025), with potential further escalation to the Supreme Court. Even without an appeal, the Section 122 tariffs were due to expire on July 26 absent a Congressional extension that appears unlikely given the political climate. The Trump administration has signaled it may pivot to Section 301 investigations as a replacement vehicle, with ongoing USTR probes covering 60 economies on forced labor and 16 economies on structural excess capacity (including Brazil) targeted to deliver new sectoral tariffs after recent hearings, and other importers will likely have to file their own cases to obtain refunds since the ruling did not issue a universal injunction.
| Element | Detail |
|---|---|
| Court | US Court of International Trade (NY) |
| Ruling date | May 7, 2026 |
| Vote | 2-1 split (Stanceu dissent) |
| Authority struck | Section 122 of Trade Act of 1974 |
| Tariff rate | 10% global (in effect Feb 24) |
| Section 122 expiry | July 26, 2026 (anyway) |
| Plaintiffs | Burlap & Barrel + Basic Fun! + 24 states |
| Granted relief | Companies + Washington state only |
| Brazil exports to US (April) | -11.3% YoY |
| Steel/aluminum (Section 232) | 25% — unaffected by ruling |
Connected Coverage
For broader context on the US-Brazil trade and supply-chain landscape, see our coverage of the Lula-Trump White House meeting and 30-day tariff working group and our analysis of Brazil’s record April trade surplus despite the 11.3% drop in US exports.
What Happens Next
- Days ahead: US administration appeal to Federal Circuit Court of Appeals expected.
- Around June 6, 2026: Lula-Trump 30-day tariff working group proposal deadline.
- July 26, 2026: Section 122 tariffs expire absent Congressional extension.
Frequently Asked Questions
What did the US Court of International Trade rule?
The US Court of International Trade in New York ruled 2-1 on May 7 that President Trump’s 10% global tariff imposed under Section 122 of the Trade Act of 1974 is illegal, blocking a key pillar of the administration’s trade architecture. The court held that Trump’s February 20 executive order failed to identify a balance-of-payments deficit as required by Section 122, rendering the order invalid and the tariffs unauthorized by law. The 10% tariff had been in effect since February 24, 2026, and was due to expire July 26 anyway absent a Congressional extension.
How does this affect Brazil and Latin America?
The ruling lands one day after the May 7 Lula-Trump White House meeting that set a 30-day bilateral tariff working group. Brazilian April exports to the US fell 11.3% year-on-year directly attributable to the tariffaço, and the ruling potentially strengthens Brazil’s negotiating position heading into the June 6 working-group deadline. However, the 25% Section 232 steel and aluminum tariffs remain in effect under separate authority not addressed by the May 7 ruling, while the Section 301 investigation against Brazil also continues unchanged.
Will the Trump administration appeal?
Yes, the administration is expected to appeal to the US Court of Appeals for the Federal Circuit, the same court that ruled against IEEPA tariffs in 2025 before the Supreme Court upheld that decision on February 20, 2026. Legal observers expect potential escalation to the Supreme Court. Even without a successful appeal, the Section 122 tariffs were due to expire on July 26, and the Trump administration has signaled potential pivot to Section 301 investigations covering 60 economies on forced labor and 16 economies on structural excess capacity as a replacement vehicle.
Who were the plaintiffs?
The case was led by 2 small businesses, Burlap and Barrel (a New York-based spice importer) and Basic Fun (a Florida-based toy company), represented by the Liberty Justice Center, the same firm that prevailed in the IEEPA-tariff Supreme Court ruling. A separate parallel challenge was filed by 24 Democratic state attorneys general, but the court ruled that 23 of the states lacked standing because they did not pay tariffs directly. Only Washington state and the 2 companies received relief; other importers will likely need to file separate cases to claim refunds.
Updated: 2026-05-08T09:30:00Z by Rio Times Editorial Desk