Global Daily Tax News, 25 US States Sue Gov't Over New Section 301 Tariffs, (Aug 7, 2026)
The US Administration is being challenged by 25 US states before the US Court of International Trade regarding the introduction of 10 or 12.5 percent tariffs under Section 301 of the Trade Act on 60 of America's trading partners.
The new tariffs are based on allegations from the US Trade Representative that the 60 economies are unfairly competing with US companies by not ensuring their exports are not the product of forced labor.
They replace the 10-percent tariff imposed earlier to address "fundamental international payment problems", which, after being levied for a maximum period of 150 days, expired on July 24, 2026.
Both sets of levies fill a void left by the US Supreme Court's February 2026 judgment that President Donald Trump is not empowered by the International Emergency Economic Powers Act to bypass Congress in imposing tariff measures on America's trading partners.
The Supreme Court deemed unlawful the earlier 25-percent tariffs introduced on Canadian and Mexican goods; the 10-percent tariff on most imports from China; and the "reciprocal tariffs" introduced at varying rates of not less than 10 percent on America's trading partners.
In response to the earlier Supreme Court ruling, Trump said he would undertake new Section 301 investigations "to protect our country from unfair trading practices of other countries and companies."
The new case - The State of Oregon v. Donald J. Trump - alleges that the tariff action is arbitrary, capricious, and contrary to law.
The States argued that the Administration cannot use forced labor as a pretext to "continue its illegal tariff scheme".
"The tariffs the USTR imposed are so broad that they defy the USTR's own stated aims and make a mockery of the statute used to justify them," they said.
The states noted that the USTR grouped the 60 economies into only four tariff categories – 10 percent on 17 economies, 10 percent net-of-MFN on two economies (including the entire European Union, which encompasses 27 member states), 12.5 percent net-of-MFN on three economies, and 12.5 percent on 38 economies.
They said: "The narrow 2.5 percent spread between the two nominal rates and the coarse clumping of economies into four groups strongly suggest no real relationship between the purportedly unreasonable practices of every substantial United States trading partner and the tariff rates the USTR is imposing on them."
Further, they said: "The USTR identified no link between tariff rates and the prevalence of forced labor-tainted goods by economy, did not engage or respond meaningfully to the comments and testimony that undercut USTR's claimed rationale, established product-based exemptions inconsistent with the USTR's own exemplars, and did not weigh the costs and benefits of the Tariff Action."
"In short, there is no rational fit between the purported problem of forced labor in international supply chains and the blanket global tariffs the USTR imposed."
"The USTR identifies no mechanism by which an economy could be released from the tariffs through strengthened forced-labor-import enforcement, sets no benchmarks to measure the effectiveness of a country's import controls, and erects an effective floor of 10 percent even on countries that the USTR acknowledges are making efforts to combat forced-labor-imports, signaling that no level of remedial action would suffice to lift the tariffs under this Administration. Because the Tariff Action is not targeted 'to obtain the elimination' of forced labor imports in foreign supply chains, it cannot be imposed under Section 301," the states said.
The states are calling on the Court to:
hold unlawful, vacate, and set aside the Tariff Action;
stay the Tariff Action and delay its effective date pending judicial review;
declare that the Tariff Action and actions to effectuate it are unlawful;
prevent the collection of the tariffs in any form; and
award refunds to the states for tariffs paid under the Tariff Action.
The case has been brought by the states of:
Arizona;
California;
Colorado;
Connecticut;
Delaware;
Hawaii;
Illinois;
Kentucky;
Maine;
Maryland;
Massachusetts;
Michigan;
Minnesota;
Nevada;
New Jersey;
New Mexico;
New York;
North Caroline;
Oregon;
Pennsylvania;
Rhode Island;
Vermont;
Virginia;
Washington; and
Wisconsin.