Small businesses sue Trump over 301 tariffs as chip stocks slide 3%

A lawsuit from multiple small businesses challenges the legality of Trump's 301 tariffs covering 99.4% of U.S. trade.

Multiple small businesses sued the Trump administration Friday over its new round of 301 tariffs, challenging duties covering 99.4% of U.S. trade as the semiconductor index slid 3%.

"We commit to continuing to use tariffs and to negotiate deals to support the reindustrialization of our economy," Jamieson Greer, the U.S. Trade Representative, said in Senate testimony Wednesday.

The new tariffs, set between 10% and 12.5%, apply to 60 trade partners and took effect at 12:01 a.m. ET Friday, replacing the temporary 10% global duties imposed under Section 122 of the 1974 Trade Act. The S&P 500 rose 0.36% and the Dow added 0.53%, while the Nasdaq slipped 0.13% as technology stocks lagged.

The lawsuit introduces fresh legal uncertainty around the administration's trade agenda, which suffered a major setback in February when the Supreme Court struck down Trump's "liberation day" duties. If the challenge gains traction, it could delay or alter tariff implementation, creating downside risks for trade-exposed industries while offering potential upside for affected importers.

Legal Challenge Adds to Trade Uncertainty

The plaintiffs filed the challenge under the Administrative Procedure Act, arguing the 301 tariffs exceed the president's statutory authority. The case is the latest in a series of legal battles over Trump's use of trade powers since the Feb. 20 Supreme Court ruling, which may embolden further challenges to other trade actions.

The semiconductor index's 3% decline reflects the sector's particular vulnerability to trade disruptions, as chipmakers rely on complex supply chains spanning Taiwan, South Korea, Malaysia and other countries affected by the new duties. Each major tariff escalation since 2018 has triggered outsized moves in chip stocks, making the sector a bellwether for trade-sensitive industries.

The White House has also imposed 25% tariffs on most imports from Brazil, effective this week, and 50% tariffs on a wide range of Canadian goods set to begin next month. These actions, combined with the new 301 tariffs, represent the administration's most aggressive trade posture since Trump returned to office.

The last major Section 301 escalation occurred in 2018-2019, when the first Trump administration imposed duties on $370 billion of Chinese goods. That round triggered retaliatory tariffs from Beijing and reduced bilateral trade by roughly 15% over 12 months, according to Census Bureau data. The current escalation covers a broader set of 60 economies, though at lower average rates of 10% to 12.5%, compared with the 25% rates applied to Chinese goods in the earlier round.

A senior Trump administration official described the forced labor action as "the most sweeping international labor rights action the United States has ever taken — that any country has ever taken." The USTR has yet to finalize a separate Section 301 investigation into excess manufacturing capacity by 16 economies, leaving open the possibility of further tariff actions.

For investors, the legal challenge adds a new variable to an already uncertain trade outlook. If the lawsuit succeeds in narrowing or blocking the current tariffs, companies in affected sectors — particularly semiconductors, consumer goods and industrial equipment — could see relief on import costs. Conversely, a prolonged legal battle could keep businesses in limbo, delaying supply chain adjustments and investment decisions.

This article is for informational purposes only and does not constitute investment advice.