Tariffs

In New Tariff Cases, Trump Asserts 'Unreviewable' Power To Invent a Balance-of-Payments Deficit

The Court of International Trade is weighing the legality of the import taxes that the president wants to impose under Section 122 of the Trade Act of 1974.

Jacob Sullum | 4.10.2026 3:40 PM

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Hours after the Supreme Court rejected President Donald Trump's "emergency" tariffs on February 20, he revealed a backup plan. Instead of relying on the International Emergency Economic Powers Act (IEEPA), which the justices held does not authorize import taxes at all, Trump invoked Section 122 of the Trade Act of 1974, which allows tariffs in response to "fundamental international payments problems" caused by "serious United States balance-of-payments deficits." The main issue raised by that new legal rationale is whether Trump is right in asserting that the United States faces such a situation.

On Friday, the U.S. Court of International Trade (CIT) considered that question during oral argument in two cases challenging Trump's Section 122 tariffs, which he initially set at 10 percent before saying they would be raised to 15 percent—the maximum rate allowed by the statute. One lawsuit was filed on March 5 by the governors and attorneys general of 24 states, while the other was filed on March 9 by the Liberty Justice Center (LJC) on behalf of two small U.S. businesses. Both sets of plaintiffs argue that the circumstances described by Section 122 not only do not exist but cannot exist under the current monetary system.

In response to the lawsuits, Assistant Attorney General Brett Shumate notes that the plaintiffs who opposed Trump's IEEPA tariffs, which likewise included a bunch of blue states along with small businesses represented by the LJC, suggested that Section 122 was the appropriate vehicle for tariffs aimed at addressing the purported problem posed by the longstanding U.S. trade deficit in goods. "Plaintiffs repeatedly argued that the President's tariffs were unlawful under IEEPA but would be justified under Section 122," Shumate writes. He adds that federal courts, including the CIT, "relied on plaintiffs' counsel's arguments and agreed that Section 122 was the proper authority for imposing such tariffs."

Shumate does not mention that the Trump administration has also changed its tune. In defense of the IEEPA tariffs, the government's lawyers rejected the idea that the president should instead rely on Section 122. That provision, Shumate and his colleagues said, does not have "any obvious application here, where the concerns the President........

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