New York and New Jersey won a temporary court order blocking the Trump administration’s freeze on federal funds for the $16 billion Gateway tunnel under the Hudson River.

U.S. District Judge Jeannette Vargas on Friday granted a request by the two states for a temporary injunction restoring funding to the project while their lawsuit against the U.S. Department of Transportation continues. The ruling is a major victory for the tunnel development, which was set to halt work by the end of the day.

“Plaintiffs have adequately shown that the public interest would be harmed by a delay in a critical infrastructure project,” Vargas said in her written decision. She said the states are “likely to succeed on the merits” of their claim that the funding freeze was arbitrary and capricious. The judge also said she was “persuaded that plaintiffs would suffer irreparable harm in the absence of an injunction.”

The White House and the Department of Transportation didn’t immediately respond to requests for comment after normal business hours.

Earlier, Gateway had announced plans to suspend work, saying it couldn’t continue without federal funding. About 1,000 workers will immediately lose their jobs and an “extended pause” risks another 11,000 construction positions on the development, along with 95,000 jobs and nearly $20 billion in economic activity generated from the project, according to Gateway.

“For more than two years the hardworking men and women building the Hudson Tunnel Project have not missed a day of work,” Tom Prendergast, Gateway’s chief executive officer, said in a statement Friday. “That changes today, because the federal Administration continues to withhold funding for this vital investment in our nation’s rail infrastructure.”

Gateway is one of the most ambitious infrastructure projects in the U.S. It will add train capacity between New Jersey and Manhattan by building a new two-track tunnel. The existing tube is more than 100 years old and needs to be rehabilitated as its reaching the end of its useful life.

The Trump administration has been in a standstill with Gateway since October, when it halted funding for the tunnel over a new rule that prohibits contracting requirements based on race or sex. New York and New Jersey sued the administration on Tuesday in federal court in Manhattan after Gateway filed its own suit late Monday in an effort to unlock more than $205 million of federal funds in the Court of Federal Claims.

The White House told Senate Minority Leader Chuck Schumer, the New York Democrat, that the holdup of federal funds for Gateway could end if he supports renaming the Washington Dulles International Airport and New York’s Penn Station after Trump, according to people familiar with the matter, who asked for anonymity to disclose private discussions.

Trump told reporters Friday that Schumer had been the one to suggest renaming Penn Station after him. Renaming Dulles Airport “is a separate kind of deal,” he said. “But it was suggested to me by numerous people, unions, Democrats, Republicans, a lot of people suggested. Nothing’s been done on that.”

After the judge’s ruling, Schumer said “Trump should do the right thing and end the freeze to let Gateway move forward once and for all.”

New York Attorney General Letitia James called the judge’s decision “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.”

About 450 trains move through the existing Hudson River tunnel each day, with two tracks serving trains going in opposite directions. Shutting down one track for repairs or to remove a disabled train forces all trains to operate on a single track. Major disruptions are common.

The U.S. Department of Transportation had urged Vargas to reject the request for a restraining order and dismiss the suit, arguing that the dispute belongs in the Court of Federal Claims. The USDOT said there is “no freestanding statutory obligation requiring continued funding.”

Jeremy Feigenbaum, an attorney for New Jersey, at a hearing Friday told Vargas the states have “genuinely independent and distinct harms” from the funding freeze because they will have to pay to maintain the Gateway construction sites once the project runs out of money.

“There’s a serious public safety and public health threat in our sovereign communities and we have to do something about it,” Feigenbaum said. “The boring machine needs to be maintained, the sites need to be secured and that will cost money.”

“Project sites cannot just be abandoned,” Shankar Duraiswamy, another attorney for New Jersey, told the judge. “There is literally a massive hole in the earth in North Bergen, New Jersey. There is an active construction site in the Hudson River. There’s a 1,600-ton tunnel-boring machine that has been delivered and is sitting in New Jersey. That cannot simply be abandoned.”

Gateway has limited funds to supervise and secure those sites, he said, but will soon run out of money and the states will have to maintain them, he said.

The suspension will cause problems even if the funding is eventually restored, Duraiswamy said. Workers who have been laid off may find other work, contractors may be unwilling to return given uncertainty over the future of the project and new schedules will have to be developed and aligned.

“Even a short delay in a massive construction project such as this can compound over time and result in much more significant delays,” he said.

But Tara Schwartz, a lawyer for the Department of Transportation, said the project could be funded by the states.

“The states say there is this parade of horribles that will occur if they have to put hammers down because this is a massive infrastructure project,” Schwartz said. “It’s not clear why the states couldn’t contribute money to keep this infrastructure project going.”

(Robert Burnson contributed to this report.)

©2026 Bloomberg L.P. Visit bloomberg.com. Distributed by Tribune Content Agency, LLC.