(WASHINGTON) -- In what has become a recurring legal battle for the Trump administration, a panel of judges is hearing arguments Friday about the legality of new tariffs that a policy research center says contribute to costing every household about $1,000.
A group of plaintiffs -- including 24 states, the toy company behind Care Bears and Lincoln Logs, and a spice importer -- argue that the Trump administration is abusing a little-known law to impose a sweeping 10% tariffs after the Supreme Court found the last round of tariffs were unlawful.
"The President has once again exercised tariff authority that he does not have --involving a statute that does not authorize the tariffs he has imposed --to upend the constitutional order and bring chaos to the global economy," the state attorneys general said in their lawsuit.
The arguments are being heard by a three-judge panel on the Court of International Trade.
The legal dispute comes down to the interpretation of Section 122 of the Trade Act of 1974, which allows the president to temporarily levy tariffs of up to 15% in response to "fundamental international payments problems" such as "balance-of-payments deficits." The law allows the president to impose tariffs unilaterally for 150 days, after which Congress needs to approve the tariffs.
Lawyers for the Trump administration have argued that the United States' massive trade deficit constitutes exactly the kind of problem Section 122 was designed to fix. A coalition of Democratic attorneys general disagrees, arguing the Trump administration is conflating different financial issues -- "trade deficits" and "balance of payments deficits."
While both terms use the word "deficit," a "trade deficit" is created by having less exports than imports, while a "balance of payments deficit" accounts for all international transactions involving the United States, according to the Cato Institute, a libertarian-leaning think tank.
"Were the President to find the endless tariff authority he seeks based only on his decision to conflate trade deficits alone with balance of payments deficits, he would be seizing power from Congress unconstitutionally," the attorneys general argue.
According to the Yale Budget Lab, a nonpartisan policy research center, Trump's tariffs -- including the broad Section 122 tariffs, as well as metal and pharmaceutical tariffs imposed under different authorities -- are estimated to cost every household between $760 and $940 if the Section 122 tariffs expire within 150 days. If Congress were to extend the tariffs, the price impact could be between $1,200 and $1,500 for each household.