Within hours of the Supreme Court’s February 20 ruling that held many of President Trump’s tariffs unlawful, Trump signed a proclamation deploying the first of his so-called “fallback options” to keep tariffs in place. He invoked Section 122 of the Trade Act of 1974, a never-before-used provision of law enacted so that the president could address problems in the U.S. balance of payments, to impose a nearly global 10% tariff.
Invocation of Section 122 quickly triggered a lively debate on social media and in the press over whether these new tariffs were any more lawful than the ones just struck down. Economists have argued that there is no “fundamental international payments problem” of the type that Congress sought to address when it enacted Section 122, with some even claiming that balance of payments problems of the type Congress envisioned 42 years ago cannot truly exist in today’s era of floating exchange rates.
For all the public debate, the legal reality is that courts will likely provide President Trump substantially more deference regarding Section 122 than they did to his previous tariffs under IEEPA, the 1977 emergency powers statute that the Supreme Court ruled on last month. But if he wants to avoid his trade policy being consumed by judicial fights over the metes and bounds of tariffs, he should be more careful to stay within the law’s boundaries. And since 122 comes with a 150-day expiration, he will need to rely on other tariff authorities thereafter.
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