The legal battle against President Donald Trump’s temporary 10% global tariff is intensifying, mirroring the pushback previous levies have faced.
Two small businesses sued the Trump administration in the Court of International Trade this week, calling for the removal of the Section 122 levy just days after more than 20 states filed a similar lawsuit. The businesses, spice brand Burlap and Barrel and toy company Basic Fun, also outlined the potential harm the tariffs could have on their operations.
More specifically, Burlap and Barrel said that many of its spice imports are not available domestically, making a shift to U.S.-grown alternatives impossible. This will drive up costs and reduce the company’s ability to invest in its business, including on the domestic front, per the filing.
Meanwhile, Basic Fun, whose brands include Tonka and Care Bears, said U.S. manufacturing and supplier capabilities are not sufficient to support large-scale domestic toy production. The company also said it cannot mitigate tariff costs by raising prices because it sells most of its products to “large retailers with substantial bargaining power.”
“In some instances, Basic Fun! must continue fulfilling retailer orders even when tariffs eliminate or nearly eliminate the company’s profit on those sales to maintain its position with major retailers and keep its products on store shelves,” the filing says, further noting that the cost pressure from tariffs endangers its standing with its financing sources.
Under Section 122 of the Trade Act of 1974, a president can institute tariffs of as much as 15% for up to 150 days to address balance of payment deficits.
Burlap and Barrel and Basic Fun argue that “it is economically impossible” for the U.S. to face such a deficit due to the nature of the current currency exchange rate system. It further argues that Trump is falsely equating a trade deficit with a balance of payment deficit, following a similar line of argument as the states that sued the president last week.
Taking the matter further, Burlap and Barrel and Basic Fun cite Trump administration testimony from its defense of defunct levies that were instituted under the International Emergency Economic Powers Act. According to the filing, the administration specifically leveraged IEEPA “because Section 122 does not apply to the facts at hand.”
“But when the Supreme Court held that the President lacked authority under IEEPA to impose tariffs, he responded by doing the exact thing he told the federal courts he could not do: use Section 122 as a replacement to IEEPA to impose worldwide tariffs due to the United States trade deficit,” the filing says.
Burlap and Barrel and Basic Fun also echo the states’ suit by highlighting Section 122’s requirement that any tariffs be applied uniformly, with some narrow exceptions. The filing says current exceptions, which include carveouts for goods from several trading partners, “are not limited to those categories allowed by Section 122—instead, they are the President’s policy preferences.”
The recent challenges to Section 122 as a tariff tool closely resemble the beginning of the legal resistance that eventually led to the invalidation of Trump’s IEEPA tariffs.
After the president announced the levies last April, multiple companies and states filed lawsuits calling for their elimination. The Court of International Trade later ruled to block the tariffs, a decision that was upheld by a federal appeals court. The Trump administration then appealed to the Supreme Court, which ultimately struck down the levies.
