Trump Imposes New Tariffs, Citing Balance of Payments Concerns Amid Legal Challenges
President Donald Trump has announced a new round of tariffs, invoking Section 122 of the Trade Act of 1974, following a Supreme Court ruling that struck down his previous tariff policies. The move, framed as a response to a potential balance-of-payments crisis, has drawn skepticism from economists and sparked renewed legal uncertainty.
Supreme Court Ruling and Tariff Reinstatement
The Supreme Court’s February 20, 2026, decision invalidated tariffs that were central to Trump’s economic agenda, finding that the President lacked clear congressional authorization to impose them. As reported by USA Today, Trump reacted with strong criticism of the court, calling some justices “ashamed” and accusing them of acting out of fear.
In response, Trump announced a 10% tariff, later raised to 15%, citing “fundamental international payments problems” as justification under Section 122 of the Trade Act of 1974. This statute allows the President to impose duties for up to 150 days in cases of “large and serious United States balance-of-payments deficits” or an “imminent and significant depreciation of the dollar.”
Economic Arguments and Skepticism
The administration, through Treasury Secretary Scott Bessent, has described the tariffs as a temporary “bridge” while studies are conducted on other tariff authorities. CNBC reported that Bessent indicated the tariffs would ensure continued revenue flow to the Treasury.
But, many economists dispute the claim of a balance-of-payments crisis. Gita Gopinath, former first deputy managing director of the International Monetary Fund, stated that the tariffs would “do little to durably reduce trade deficits” and would likely cause “another round of volatile trade numbers.” Bloomberg highlighted this skepticism, noting that financial markets have not shown signs of a crisis.
Jay Shambaugh, a former US Treasury official, likewise stated there was no evidence of a balance-of-payments crisis, explaining that financial flows into the country currently balance the trade deficit. Mark Sobel, another former Treasury official, argued the premise was based on an outdated view of the US economy.
Legal Challenges and Historical Precedent
Trump’s invocation of Section 122 is likely to face legal challenges. Experts suggest the justification for the tariffs could be challenged in court, potentially leading to involvement from the World Trade Organization and the IMF. Jennifer Hillman, a former US trade lawyer, noted that the case could be less clear-cut than the previous challenge, but still presents legal hurdles.
The last time a US president used tariffs to address balance-of-payments concerns was in 1971 under Richard Nixon, a temporary measure to renegotiate fixed exchange rates and address a dollar overvaluation. Section 122 was enacted in response to Nixon’s actions to provide boundaries for future presidential use of tariffs.
Potential Implications
The new tariffs and the reasoning behind them could return to the Supreme Court. Neal Katyal, the lawyer who successfully argued against Trump’s previous tariffs, pointed out that the administration’s own lawyers previously argued Section 122 was not applicable in this context. POLITICO reported on this potential conflict.
The dollar and US stock futures fell on Monday following the announcement, reflecting renewed uncertainty over Trump’s trade policy. The long-term impact of the tariffs will depend on legal challenges, congressional action, and the broader economic environment.