At the center of the latest chapter in America’s trade war saga is an obscure piece of legislation: Section 122 of the Trade Act of 1974. Never previously invoked in the half-century since its enactment, the provision has suddenly become one of the most consequential clauses in American economic law — the legal vessel through which President Trump is pressing his tariff agenda after the Supreme Court struck down his previous authority.
The 1974 Trade Act was enacted during a period of significant economic turbulence, following the collapse of the Bretton Woods monetary system and amid growing concerns about US trade competitiveness. Section 122 was included as a temporary emergency provision, giving the president the authority to impose tariffs of up to 15% for 150 days to address balance-of-payments problems. The 150-day limit and the subsequent requirement for congressional approval reflected Congress’s intent to maintain ultimate control over trade policy.
The provision’s dormancy for fifty years reflects the fact that no previous president found it necessary or appropriate to use a balance-of-payments emergency provision to impose broad-based tariffs. The specific economic circumstances that Section 122 was designed to address — severe balance-of-payments crises — have not generally been invoked in the post-Bretton Woods era. Trump’s use of it to replace IEEPA authority following a Supreme Court ruling is, to put it mildly, a creative legal interpretation.
Legal experts are divided on whether Trump’s use of Section 122 will survive judicial scrutiny. Proponents note that the text of the provision does appear to grant the authority Trump is claiming. Critics argue that invoking a balance-of-payments provision without a genuine balance-of-payments crisis may not pass muster with the courts — particularly courts that have already shown a willingness to scrutinize executive claims of emergency trade authority.
For the administration, the legal argument may matter less in the short term than the practical reality: Section 122 provides a basis for maintaining tariffs immediately, while the administration develops a more permanent legal strategy. Whether that strategy succeeds will depend on the courts, on Congress, and ultimately on whether the administration can make a credible legal case for the trade authority it is claiming.