Federal Court Nullifies Trump Administration’s $16 Billion Funding Ban on Hudson Tunnel Project

A federal judge has overturned the Transportation Department’s suspension of $16 billion in federal funding for the Hudson Tunnel Project, ruling that the freeze violated federal law.

The decision by Judge Jeannette Vargas in the Southern District of New York eliminates the legal basis for the current funding freeze.

In a 59-page ruling, Vargas held that the Transportation Department’s September 2025 suspension was unlawful because it failed to comply with procedures governing federal grant suspensions. The administration may still seek to suspend or terminate funds if it follows applicable legal requirements or succeeds in overturning the decision on appeal.

The Department of Transportation stated it remains “committed to ensuring hardworking taxpayer dollars are being spent responsibly,” according to a spokesperson.

Last year, the Trump administration indicated it would withhold funding while reviewing whether the project met federal nondiscrimination standards and included diversity, equity, and inclusion policies.

However, Vargas noted that President Donald Trump had previously signaled political motivations for halting the tunnel project, which Senate Minority Leader Chuck Schumer, D-N.Y., championed for 15 years.

Vargas quoted Trump as saying: “We’re cutting a $20 billion project that Schumer fought for 15 years to get, and I’m cutting the project. The project is gonna be dead. It’s just pretty much dead right now.”

The Hudson Tunnel Project would supplement two 116-year-old single-track tubes under the Hudson River between Manhattan and New Jersey. Schumer has called it the most critical infrastructure project in the United States.

The Gateway Development Commission, which oversees rail tunnel construction, stated in January that work would have to be canceled without the funds. Approximately $12 billion of the project’s funding comes from federal grants, while $4 billion is provided through federal loans repaid by New York and New Jersey and the Port Authority of New York and New Jersey.

New York and New Jersey jointly sued the Trump administration in Manhattan federal court to halt the suspension. On February 6, the day work was scheduled to stop, Vargas granted a temporary restraining order. The Trump administration opposed that order but Vargas noted it focused on jurisdictional arguments rather than defending the legality of the funding suspension.

In her Monday ruling, Vargas found the administration failed to demonstrate that the funds suspension was lawful. She stated: “Defendants make no attempt to justify their actions as consistent with the governing federal regulations.”

The ruling prevents the administration from relying on the September 2025 funding freeze but does not preclude the Transportation Department from pursuing a new suspension through a process that complies with federal law.

In a joint statement Monday, New York Gov. Kathy Hochul, New York Attorney General Letitia James, New Jersey Gov. Mikie Sherrill, and New Jersey Attorney General Jennifer Davenport praised the decision. They said: “We are grateful that a federal court has once again agreed that the Trump Administration’s decision to freeze billions of dollars in grants for the Gateway Tunnel Project is flagrantly unlawful.”

“This is the most important infrastructure project in the nation, and thanks to our litigation, 1,000 people are back on the job and construction continues every day. This victory sends a clear message: The Trump Administration’s attempt to halt Gateway funding will not stand.”