Section 122 Tariffs Lawsuit 2026: Two Legal Challenges That Could Reshape US-Canada Trade

Two lawsuits challenging President Trump's Section 122 tariffs are now moving through the courts on an expedited schedule. A decision could land by the end of April — and the outcome matters for anyone paying higher prices on imported goods.

Here's what's happening, what the legal arguments are, and what it all means for your wallet.

What Is Section 122?

Section 122 of the Trade Act of 1974 is a rarely used presidential power. It allows the president to impose temporary tariffs of up to 15% for 150 days when the US faces "large and serious" balance-of-payments deficits — essentially, when the country is spending far more on imports than it's earning from exports, creating an economic imbalance.

The key word is temporary. Section 122 tariffs have a built-in expiration: they can only last 150 days without Congressional approval. The current Section 122 tariffs, set at 10%, are scheduled to expire on July 24, 2026.

This is different from Section 232 tariffs (national security, used for steel and aluminum) or IEEPA tariffs (emergency economic powers). Section 122 is specifically about balance of payments — a narrower justification with specific legal requirements.

The Two Lawsuits

Two separate legal challenges have been filed at the US Court of International Trade (CIT), the specialized federal court that handles trade disputes:

1. Oregon v. United States (21 States)

Oregon, joined by 20 other states, is challenging the tariffs directly. This is a state-level challenge arguing that the federal government overstepped its authority under Section 122.

2. Burlap & Barrel v. United States

Burlap & Barrel, a small spice importer, is bringing the second challenge with representation from the Liberty Justice Center. This case puts a human face on the tariffs — a small business arguing that these duties are hurting real companies that depend on imports.

The CIT has assigned a three-judge panel to hear both cases: Judge Mark Barnett, Judge Claire Kelly, and Senior Judge Tim Stanceu. All three are experienced trade law judges.

The Legal Arguments (In Plain English)

Both lawsuits make three core arguments against the Section 122 tariffs:

The Balance of Payments Doesn't Qualify

Section 122 requires a "large and serious" balance-of-payments deficit to justify tariffs. The plaintiffs argue that the current US trade situation, while showing a deficit, doesn't meet this specific legal threshold. The US runs trade deficits regularly — that alone doesn't automatically trigger Section 122 authority. The argument is that the administration hasn't demonstrated the kind of acute balance-of-payments crisis the law was designed to address.

USMCA Exemptions Break the Rules

Section 122 requires that tariffs be applied on a non-discriminatory basis — you can't pick and choose which countries get hit and which don't. The plaintiffs argue that exempting goods that comply with USMCA (the US-Mexico-Canada trade agreement) violates this non-discrimination requirement. If some imports from Canada and Mexico get exemptions while others don't, that's discriminatory treatment under the statute.

Section 232 Product Exemptions Are Unjustified

Products already subject to Section 232 tariffs (steel and aluminum) were exempted from the Section 122 tariffs. The lawsuits argue this carve-out lacks adequate justification. If the tariffs are about balance of payments, why exempt certain products? The selective application undermines the stated rationale.

How Hard Is This Case to Win?

Trade law analyst Peter Harrell, who flagged the expedited schedule on March 12, thinks this is a tougher fight for the challengers than the IEEPA tariff litigation that preceded it.

The reason: the CIT and the Federal Circuit (the appeals court that handles trade cases) historically give significant deference to presidential factual findings on trade matters. When a president says "the balance of payments situation requires action," courts tend to take that seriously rather than second-guessing the economic analysis.

That said, the three-judge panel will scrutinize the legal arguments carefully. The non-discrimination requirement and the question of whether the balance-of-payments threshold is actually met are legitimate legal questions that deserve — and will get — serious judicial review.

The Timeline

The court has set an expedited schedule, which tells you the judges understand the time sensitivity:

• April 3, 2026 — Briefings due from both sides
• April 10, 2026 — Oral arguments before the three-judge panel
• Late April 2026 — Decision expected from CIT
• After decision — Almost certain appeal to the Federal Circuit, regardless of outcome
• July 24, 2026 — Section 122 tariffs expire automatically (150-day limit)

That July 24 expiry date is the elephant in the room. Even if the courts don't strike down these tariffs, they disappear on their own unless Congress extends them — which is far from guaranteed.

The Rate Hike That Hasn't Happened

On February 21, President Trump announced plans to raise the Section 122 tariff rate from 10% to 15% (the statutory maximum). As of mid-March, that increase hasn't been implemented.

Why the delay? Likely a combination of factors: the pending litigation creates legal risk, financial markets are already jittery, and inflation driven by the Iran conflict makes adding more cost pressure politically awkward. With the July 24 expiry looming, there's a real question of whether the rate hike happens at all.

What This Means for You

For Consumers

The 10% Section 122 tariffs are currently adding costs to a broad range of imported goods. If the courts strike them down, you could see price relief on affected products — though it takes time for tariff reductions to flow through supply chains to retail prices.

Even if the lawsuits fail, remember the July 24 expiry. These tariffs have a shelf life. Planning major purchases? The second half of 2026 could bring lower prices on imported goods, assuming Congress doesn't extend the tariffs.

For Businesses

If you're importing goods affected by Section 122 tariffs, watch the April timeline closely. A favorable CIT ruling could mean refunds on tariffs paid. Even without a court win, the July 24 expiry date is your planning horizon.

Businesses should also consider: if the tariffs are struck down or expire, competitors who shifted to domestic sourcing may reverse course, changing competitive dynamics. Build flexibility into your supply chain strategy.

The Bottom Line

The Section 122 tariff lawsuits are moving fast. April will be the pivotal month — with briefings, oral arguments, and potentially a ruling all within weeks. The legal challenge is legitimate but faces an uphill battle given how courts typically defer to presidential trade authority.

The practical reality: even if the courts side with the government, these tariffs expire July 24 regardless. The next four months will determine whether they end in a courtroom or on a calendar — but either way, Section 122 tariffs have an expiration date.

Source: Analysis draws on trade law commentary by Peter Harrell (@petereharrell), March 12, 2026.

For more background on the broader tariff landscape, read our 2026 US-Canada Tariff Guide and our breakdown of steel and aluminum tariff impacts.