Key Points:
- President Trump used Section 122 to replace struck-down tariffs.
- Treasury Secretary Bessent calls the tax a temporary five-month bridge.
- Economists argue the US is not facing a payments crisis.
- Legal experts predict the move will spark fresh court battles.
President Donald Trump is using a rare legal argument to keep his trade war alive. After the Supreme Court struck down his previous tariffs on Friday, the President invoked Section 122 of the Trade Act of 1974. This statute allows him to tax imports for up to 150 days if the country faces a “balance-of-payments” crisis. He initially set the rate at 10 percent but quickly raised it to 15 percent to replace revenue lost from the court’s decision.
Treasury Secretary Scott Bessent defended the strategy on Sunday talk shows. He described the new tax as a “five-month bridge.” During this short window, the administration plans to conduct the formal investigations required to implement more permanent tariffs under different laws. Bessent claimed this authority is robust, though he did not explain exactly how the current economy meets the crisis definition required by the statute.
Most economists disagree with the President’s assessment. The law technically requires a “large and serious” deficit or a collapsing dollar. Currently, the US dollar remains strong, and investors continue to pour money into American assets.
Gita Gopinath, formerly of the International Monetary Fund, stated plainly that the US does not have a fundamental payments problem. She warned that short-term tariffs will likely just cause volatility as importers rush to buy goods before prices rise.
This specific law has gathered dust for decades. The last President to use it was Richard Nixon in 1971. Back then, the US actually faced a run on its gold reserves and a currency attack. Today, the situation is different. Mark Sobel, a former Treasury official, argued that applying this law now is based on an outdated view of the global economy that died with the gold standard.
Legal experts predict this strategy will end up back in court. Jennifer Hillman, a former trade judge, noted that it is unclear if Trump has met the legal conditions for Section 122. However, the clock is ticking. Because the authority expires in 150 days, the tariffs might end naturally before a judge can even issue a final ruling, giving the administration the temporary cover it needs.
