U.S. President Donald Trump announced a new round of 10-per-cent global tariffs to replace broad duties that were struck down by the Supreme Court last week.Carlos Barria/Reuters
Days after U.S. President Donald Trump authorized a new set of global tariffs to replace those struck down by the Supreme Court, lawyers say the White House is again using questionable legal grounds to justify its actions.
They expect a new round of lawsuits to emerge in the coming weeks, renewing uncertainty over a key tenet of U.S. economic policy – one that has brought upheaval to global trading systems.
The Trump administration has turned to Section 122 of the Trade Act of 1974 for its new round of 10-per-cent tariffs, which took effect Tuesday. The President cited what he called, in an executive order, “serious balance-of-payments deficits” that “endanger the ability of the United States to finance its spending, erode investor confidence in the economy, and distress the financial markets.”
Mr. Trump has long criticized trade deficits, offering tariffs as a remedy to what he has called unfair treatment of the U.S. by other countries. Over the past year, he frequently invoked the International Emergency Economic Powers Act (IEEPA) to threaten and impose tariffs against U.S. trading partners – until the Supreme Court ruled last week that IEEPA gave him no such authority.
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In its place, he turned to Section 122, ordering a 10-per-cent tariff and pledging to raise that to 15 per cent.
But Section 122 is a legal tool designed to address international payments problems “of a kind that can only really exist under a fixed-exchange rate regime,” argued Ilya Somin, a law professor at George Mason University. Prof. Somin was co-counsel on one of the cases against the previous iteration of global tariffs, filed on behalf of several U.S. businesses.
Such a regime does not currently exist, and Prof. Somin expects the first legal challenges to the new set of tariffs to arrive within weeks.
“Section 122 tariffs are vulnerable on a number of grounds. And I think there’s at least a good chance they would be struck down – I certainly hope they would be,” he said in an interview.
Mr. Trump, in his executive order, sought to draw a link between balance of payments and the country’s long-standing trade deficits, saying the U.S. “does not currently make a net income from the capital and labor that it deploys abroad, and experiences more transfer payments, on net, flowing out of the country than into the country.”
Some scholars have defended that logic.
“More than 90 per cent of the balance of payments is the trade deficit,” Georgetown University professor Marc Busch and University of Toronto economist Daniel Trefler wrote last year. The intent of Section 122, they wrote, “was to hand the executive a tool to address the very condition the executive now calls the trade deficit.”
“Suggesting otherwise is akin to handing the president a fire hose and insisting it can only be used for kitchen fires, not living room fires.”
But opposition to what the Trump administration has done has come from a particularly unusual place: the administration’s own lawyers. In arguing for the previous tariffs, under IEEPA, they argued that Section 122 did not “have any obvious application here, where the concerns the President identified in declaring an emergency arise from trade deficits, which are conceptually distinct from balance-of-payments deficits.”
If Mr. Trump “wants sweeping tariffs, he should do the American thing and go to Congress,” lawyer Neal Katyal, who argued before the Supreme Court against the previous tariffs, wrote on X. “If his tariffs are such a good idea, he should have no problem persuading Congress.”
That argument, however, is not clear-cut – not least because Section 122 does not define exactly what constitutes a balance-of-payments problem.
“I think that a court is likely to give the administration a bit of leeway here,” said Timothy Meyer, a scholar of international business law at Duke University.
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He nonetheless believes the current tariffs are unlawful because they violate language in Section 122 requiring that they comprise “nondiscriminatory treatment.” Mr. Trump’s executive order carves out duty-free allowances for some goods from Canada, Mexico and Central America.
“It’s hard to fit those exceptions into the non-discrimination rule,” Prof. Meyer said. That rule was written to prevent the president from “picking and choosing winners.”
He expects legal challenges to the tariffs, although those are likely to be complicated by the short duration of Section 122 tariffs, which can only last 150 days without congressional authorization.
At the same time, arguments over the new tariffs emphasize “that the last round of litigation was worth it,” said Andrew Morris, senior litigation counsel with the New Civil Liberties Alliance, a conservative group that fought Mr. Trump’s use of IEEPA.
Even if they stand, the Section 122 tariffs are a blunt instrument, a less potent tool than the emergency tariffs Mr. Trump used as a cudgel against foes and allies alike.
“Already, the President’s authority is so limited compared to the sweeping stuff that was going on last year.”