Washington, Feb 24 (.) With the US Supreme Court rejecting the Trump administration’s reliance on emergency powers to impose tariffs on Friday, the White House moved swiftly to deploy a different statutory mechanism, prompting fresh scrutiny from economists and trade lawyers over whether the new approach rests on firmer legal ground, according to Axios.
The administration has reportedly pivoted from using the country’s International Emergency Economic Powers Act (IEEPA) to invoking Section 122 of the Trade Act of 1974.
Over the weekend, it imposed 15 per cent global tariffs under Section 122, a rarely used provision that allows the President to levy tariffs of up to that level for 150 days in the event of a balance-of-payments crisis.
Section 122 was designed for circumstances in which the US faces dire conditions posing serious external financial instability, such as a plunging currency, surging interest rates or a sudden halt in foreign capital inflows, none of which are currently present at the moment.
Joe Brusuelas, chief economist at RSM, said in a note that “no matter how one looks at the current circumstances – the condition of the US economy, its balance of payments or its currency regime – none of these meet the standards outlined under Section 122.”
The legal footing of the move has also drawn considerable attention. In a court filing last year, Department of Justice lawyers appeared to distance themselves from Section 122 as a basis for broad tariff action.
In that brief, assistant attorney general Brett Shumate argued that the concerns cited by the president in declaring an emergency related to trade deficits, which are “conceptually distinct from balance-of-payments deficits”. The filing stated that Section 122 did not have “any obvious application” in that context.
Despite those reservations, the administration’s latest action may prove difficult to unwind quickly, as per economists.
Courts could struggle to reach a definitive ruling on the legality of the Section 122 tariffs within the 150-day window permitted under the statute, particularly in the absence of Congressional intervention.
That timeframe gives the White House room to maintain the measures while it pursues alternative trade actions under more established authorities, including Sections 232 and 301, which relate to national security and unfair trade practices respectively.
However, legal challenges appear likely. Dave Townsend, an international trade lawyer at Dorsey & Whitney, said that given the financial stakes for US businesses, a new wave of litigation could emerge seeking to invalidate the Section 122 tariffs and secure refunds of duties collected under the provision.
The administration’s rapid shift from one emergency tool to another in its ongoing weaponisation of tariffs, is noted to signal a continued willingness on its part to test the outer limits of executive authority over trade policy.
In a fact sheet released on Friday, the White House argued that unresolved international payment imbalances could undermine Washington’s ability to finance its spending, weaken investor confidence, destabilise financial markets and ultimately threaten economic and national security.
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