New York Leads 24 States Suing Trump Over $130 Billion Tariff 'End Run' as Judge Orders Refunds

The Trump administration is facing a two-front legal assault over its tariff policies, with 24 states filing suit Thursday to block the president's latest attempt to impose sweeping duties while a federal judge simultaneously ordered the government to begin issuing more than $130 billion in refunds for tariffs the Supreme Court already deemed illegal.

The coordinated legal offensive, led by New York Attorney General Letitia James, represents the most significant challenge yet to President Donald Trump's signature economic policy following last month's landmark Supreme Court defeat. James and prosecutors from 23 other states filed their lawsuit in the Court of International Trade, arguing that Trump is misusing Section 122 of the Trade Act of 1974 to circumvent the high court's ruling that struck down his original tariffs imposed under the International Emergency Economic Powers Act.

"After the Supreme Court rejected his first attempt to impose sweeping tariffs, the president is causing more economic chaos and expecting Americans to foot the bill," James said in a statement to CNBC. "President Trump is ignoring the law and the Constitution to effectively raise taxes on consumers and small businesses."

The lawsuit arrives just one day after Judge Richard Eaton of the U.S. Court of International Trade ruled that "all importers of record" are entitled to refunds from the invalidated tariffs. According to the Associated Press, Eaton's decision — which came in a case brought by Atmus Filtration, a Nashville company that makes filters — is expected to broadly benefit importers and consumers. More than 2,000 companies, including Costco and FedEx, have already filed lawsuits seeking to recoup tariff costs, Yahoo Finance reported.

The timing is particularly awkward for the administration. Treasury Secretary Scott Bessent told CNBC on Wednesday that the current 10% global tariff will likely rise to 15% "sometime this week." Bessent expressed confidence that "the tariff rates will be back to their old rate within five months" — by August — once the Office of the U.S. Trade Representative and Commerce Department complete trade-related studies that would allow them to impose duties under different legal authorities.

But the state attorneys general are having none of it. Their lawsuit contends that Trump is fundamentally misusing Section 122, which they argue was designed to address specific monetary imbalances when the United States operated under the gold standard, not to combat general trade deficits. The coalition also claims the tariffs violate the Constitution's separation-of-powers principle, which grants Congress — not the president — the authority to impose duties. Additionally, they argue Trump's levies violate the 1974 Trade Act's requirement that tariffs be applied consistently across countries.

According to CNBC, the effort represents "a clear attempt to escape the Supreme Court's ruling" against the IEEPA-based tariffs. The White House pushed back through spokesman Kush Desai, who said "the President is using his authority granted by Congress to address fundamental international payments problems and to deal with our country's large and serious balance-of-payments deficits. The Administration will vigorously defend the President's action in court."

The legal maneuvering has created extraordinary uncertainty in global trade. Section 122 allows the president to impose tariffs of up to 15% for only 150 days to address trade deficits, according to Yahoo Finance. During that window, the administration is racing to establish alternative legal foundations for its tariff regime — a process that trade lawyer Ryan Majerus, a partner at King & Spalding and former U.S. trade official, told the Associated Press will likely face government appeals or requests "to buy more time for U.S. Customs to comply" with refund orders.

The personal history between Trump and James adds an intriguing subplot. The president's Justice Department indicted James in October on two counts of bank fraud and making false statements to a financial institution. However, a judge threw out the indictment, and two separate grand juries declined to revive the charges, leaving James facing no legal jeopardy. Now she's leading the charge against Trump's economic centerpiece.

This isn't the first time James and her coalition have taken on Trump's tariffs. Last year, she and 11 other states sued to halt the original round of duties. That effort eventually merged with lawsuits from small businesses affected by tariffs in the Supreme Court case that handed Trump one of the biggest legal defeats of his second term last month.

The refund situation is particularly thorny. Judge Eaton's ruling offers some clarity on what Yahoo Finance called the "murky process to recoup tariff costs, which could take years to play out." The $130 billion figure represents a massive financial liability for the administration, and Senator Elizabeth Warren has already weighed in, writing to Trump that his administration "has a responsibility to do everything in its power to ensure that it returns the money it illegally took from the American people," according to Yahoo Finance. Warren characterized the delay in processing refunds as "theft in broad daylight."

International partners are watching nervously. The European Union has reportedly halted ratification of its trade deal with the United States, saying it needs "full clarity on Trump's next steps before proceeding," according to Yahoo Finance. Meanwhile, Canadian businesses have been particularly hard hit, with many firms losing 50% of their customers over the past year as U.S. companies restructure supply chains to avoid Trump's 25% metal tariffs, Bloomberg reported.

The Federal Reserve's latest Beige Book, released Wednesday, painted a mixed picture of the economy, noting that growth was "muted in February as tariffs increased costs for businesses, some of which passed along higher prices to consumers," Yahoo Finance reported. The qualitative assessment underscores the real-world impact of the tariff chaos on American businesses and consumers.

Trump has shown some willingness to adjust course. In recent weeks, he's made plans to roll back some tariffs on metals as his administration seeks to battle an affordability crisis ahead of midterm elections. But the legal framework for his broader tariff regime remains in flux.

The dual court battles set up a fascinating test of presidential power and congressional authority over trade policy. If the state attorneys general prevail, Trump will have lost twice in his effort to reshape American trade policy through executive action. If the administration successfully defends Section 122 as a valid tariff authority, it will have found a narrow legal pathway to maintain at least some version of its protectionist agenda — at least for 150 days.

What's clear is that the tariff wars are far from over. With refunds flowing, new duties being challenged, and international partners demanding clarity, the next several months will determine whether Trump can salvage his signature economic policy or whether the courts will force a fundamental rethinking of how America approaches trade. For businesses caught in the middle, the uncertainty itself has become the most expensive tariff of all.