A federal judge on Feb. 6 directed the Trump administration to resume funding for a new rail tunnel between New York and New Jersey just as construction was poised to shut down on the project.

The $16 billion Hudson Tunnel Project involves building a new tunnel and railroad infrastructure for passenger rail trains under the Hudson River, while rehabilitation efforts take place on the existing tunnel. The new tunnel will carry Amtrak and New Jersey Transit Northeast Corridor passenger trains between New Jersey and New York.

Federal grants and loans are expected to cover $12 billion, and the two states are responsible for the remaining $4 billion.

The plaintiffs, New York and New Jersey, sued the U.S. Department of Transportation (USDOT) in federal court on Feb. 3.

The states said in a legal filing that they had been using limited operating funds to cover project construction for the past four months and that if they didn’t get federal funding restored by Feb. 6, the project would have to shut down.

The new ruling by U.S. District Judge Jeannette Vargas of New York came months after the federal government cut off funding for the project, citing concerns that some specific expenditures were unconstitutional because they were based on so-called diversity, equity, and inclusion (DEI) principles.

In Executive Order 14151, President Donald Trump directed the Office of Management and Budget to terminate discriminatory programs, including DEI programs. Programs that promote DEI are “illegal and immoral,” the order stated.

In their legal complaint, the states said that on Dec. 1, 2025, USDOT told the Gateway Development Commission, which oversees the project, that the commission had violated federal minority contracting rules by presuming contracting companies were qualified if they were female-, black-, Hispanic-, Asian-, or Native American-owned, without ensuring that they actually met legal requirements.

USDOT said in an Oct. 3, 2025, statement that “Illinois, like New York, is well known to promote race- and sex-based contracting and other racial preferences as a public policy.”

USDOT added that it was reviewing several projects, including those involving the Hudson Tunnel, New York’s Second Avenue Subway, and the Chicago Transit Authority, “to ensure no additional federal dollars go towards discriminatory, illegal, and wasteful contracting practices.”

Vargas issued a temporary restraining order preventing the Trump administration from withholding funding for the project. The states are seeking to upgrade the temporary restraining order to a preliminary injunction to keep funding flowing while the lawsuit plays out in court.

“The Court is also persuaded that Plaintiffs would suffer irreparable harm in the absence of an injunction,” Vargas said in her order. “Plaintiffs have adequately shown that the public interest would be harmed by a delay in a critical infrastructure project.”

At a court hearing before Vargas made her order, Shankar Duraiswamy, of the New Jersey attorney general’s office, said the states needed “urgent relief” because of the harm and costs that would occur if construction is stopped.

Duraiswamy said the problem with shuttering the project was that even a brief stoppage would lead to long delays, as workers would be laid off and go to other jobs.

“Any long-term suspension of funding could torpedo the project,” he added.

Tara Schwartz, an assistant U.S. attorney arguing for the federal government, said she did not agree with the “parade of horribles” presented by the states’ lawyers.

The states failed to make clear how long the Gateway Development Commission could maintain the construction site, she said.

Duraiswamy said the site could be maintained for weeks or maybe months, but that the states would suffer harm because trains would continue running late because they had to operate in an outdated tunnel.

Meanwhile, New York Attorney General Letitia James hailed the new court ruling as “a critical victory for workers and commuters in New York and New Jersey.”

“I am grateful the court acted quickly to block this senseless funding freeze, which threatened to derail a project our entire region depends on,” she said.

The Epoch Times reached out for comment on the new ruling to the U.S. Department of Justice, which represents federal agencies in court. No reply was received by publication time.

The Associated Press contributed to this report.

This article by Matthew Vadum appeared Feb. 7, 2026, in The Epoch Times.