US President Donald Trump has acted quickly to restore tariff collections after the Supreme Court of the United States struck down his earlier trade regime. But while the legal route has changed, the vulnerability may not have.
The administration's new 15% global tariffs, which took effect at midnight Tuesday, are being imposed under Section 122 of the Trade Act of 1974 — a little-used provision designed to address serious balance of payments problems. Legal scholars and economists say the United States may not meet that statutory bar, setting the stage for fresh court challenges.
What Changed After The Supreme Court Ruling
Trump's earlier tariff framework relied on the International Emergency Economic Powers Act (IEEPA). The Supreme Court ruled that IEEPA could not be used to justify tariffs rooted in trade deficit concerns.
With collections under IEEPA halted, the White House pivoted to Section 122 of the Trade Act of 1974 — a provision that allows the president to impose duties of up to 15% for not more than 150 days, provided there is a “large and serious” balance of payments deficit or fundamental international payments problem. Notably, Section 122 has never before been used to implement tariffs.
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The White House's Case
In its executive order, the administration argued that the US economy is facing serious external imbalances, pointing to a goods trade deficit of roughly $1.2 trillion annually, a current account deficit amounting to about 4% of GDP, and a reversal in the country's primary income surplus. The White House contends that these indicators reflect mounting pressure on America's external accounts and therefore justify the imposition of temporary emergency tariffs under Section 122 of the Trade Act of 1974.
Economists Push Back
Several prominent economists dispute that interpretation. Former IMF First Deputy Managing Director Gita Gopinath rejected the claim that the US is in a balance of payments crisis.
“We can all agree that the US is not facing a balance of payment crisis, which is when countries experience an exorbitant increase in international borrowing costs and lose access to financial markets,” Gopinath told Reuters.
She added that the recent shift in the US primary income balance largely reflects strong foreign returns on U.S. equity investments, not systemic distress.
Joe Brusuelas, chief economist at RSM, echoed the same view in comments to Axios. “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 meets the standards outlined under Section 122,” Brusuelas was quoted as saying.
Former Treasury and IMF official Mark Sobel noted that balance of payments crises typically occur in economies with fixed exchange rate regimes — not in countries like the United States with floating currencies.
Josh Lipsky of the Atlantic Council added that a genuine balance of payments crisis arises when a country cannot finance imports or service foreign debt — a situation fundamentally different from running a trade deficit.
A Strategic Reversal?
The administration's new reliance on Section 122 is also drawing scrutiny because of its earlier legal position. In defending the now-invalidated IEEPA tariffs, Justice Department lawyers had previously argued that Section 122 was not applicable in cases involving trade deficits.
That prior stance is now being cited by critics as evidence of inconsistency. Neal Katyal, who argued before the Supreme Court on behalf of businesses challenging the earlier tariffs, suggested the new strategy may be legally fragile.
“I'm not sure it will necessarily even need to get to the Supreme Court, but if the president adheres to this plan of using a statute that his own Justice Department has said he can't use, yeah, I think that's a pretty easy thing to litigate,” Katyal told CNBC.
Sara Albrecht, chair of the Liberty Justice Center — which represents plaintiffs challenging the earlier tariffs — told Reuters the group is closely evaluating the new order, while prioritising efforts to secure refunds for previously collected duties.
Will Courts Intervene Before 150 Days?
Even if lawsuits are filed immediately, legal experts note that courts may not issue a final ruling within the 150-day limit allowed under Section 122. That window gives the administration temporary breathing space to pursue more durable tariff pathways, including Section 232 (national security grounds) and Section 301 (unfair trade practices).
Still, analysts broadly agree that unless Congress steps in to clarify or amend the law, the administration's latest tariff move remains legally exposed. For now, the White House has restored tariff collections — but the legal uncertainty that shadowed the earlier IEEPA regime has not disappeared.
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