Trade Court Strikes Down Section 122 Tariffs
The U.S. Court of International Trade has struck down the 10 percent tariffs President Donald Trump imposed on trading partners earlier this year. As Connecting the Dots readers may recall, the president imposed these penalties after the U.S. Supreme Court struck down his International Emergency Economic Powers Act (IEEPA) tariffs.
President Trump had cited powers given by Section 122 of the 1974 Trade Act to justify the 10 percent tariffs. Under Section 122, Congress allowed the U.S. president to impose tariffs of up to 15 percent on all goods coming into the United States for up to 150 days in order to address “large and serious United States balance-of-payments deficits.” (This type of deficit arises when a country lacks value in reserve to back up its currency. They have been largely eliminated in the United States due to modern exchange rate management.)
As the CATO Institute explained, the Trump administration argued that, taken together, the trade deficit, broader current account deficit, and a declining U.S. net international investment position amounted to “large and serious balance-of-payments deficits.” In a 2-1 decision issued last week, the U.S. Court of International Trade disagreed. CATO explained that “relying on the language and legislative history of the statute and the broader historical context in which Congress passed it, the majority opinion ruled that a ‘balance-of-payment’ (BoP) deficit had a precise meaning, namely, deficits measured by specific, established methodologies: 1) liquidity, 2) official settlements, and 3) basic balance.”
Judges Mark A. Barnett and Claire R. Kelly determined “the President’s Proclamation fails to assert that those required conditions have been satisfied.”
The Section 122 tariffs were set to expire on July 24, 2026 unless the U.S. House and Senate approved legislation to extend them.
As Roll Call explained, the decision could be appealed to the U.S. Court of Appeals for the Federal Circuit, and eventually the U.S. Supreme Court. (The Trump administration is expected to appeal the ruling.) Additionally, after the decision came down, President Trump threatened another set of tariffs. He told reporters, “So, we always do it a different way. We get one ruling, and we do it a different way.”