Is Section 122 of the 1974 Trade Act a Fall-Back Option for Trump to Impose Tariffs?

Without IEEPA authority, as we have all discussed, where there is a will, there is a way. In all likelihood, this way involves the expanded use of other statutory authorities, such as Section 232 of the 1962 Trade Expansion Act and Section 301 of the Trade Act of 1974. In this post, I’ll discuss the prospects for another option: Section 122 of the Trade Act of 1974.

In May of this year, the Court of International Trade ruled unanimously that the IEEPA tariffs were illegal. In that decision, the Court reasoned that Congress’s enactment of Section 122 granted the President explicit, limited authority to impose remedies in response to “fundamental international payment problems,” including “large and serious balance-of-payments deficits” and unfair trade practices, thereby limiting executive authority to deal with the same remedies in the broader emergency powers under IEEPA.

I remain cautious about whether Section 122 is a plausible pathway, largely owing to my interest in further studying the legislative history. Putting that aside, however, in this post, I raise questions about whether the scope and meaning of Section 122 align with the Trump administration’s intended objectives.

In the Supreme Court hearings for Trump v V.O.S. Selections this week, SG Sauer explained the government’s view of the purpose of the IEEPA tariffs: they are regulatory tariffs, meaning they are “a foreign-facing regulation of foreign commerce.” (p. 13, lines 22-23 of the Transcript). SG Sauer went on to expand on what the government means by “regulation,” drawing parallels to Nixon’s imposing of tariffs, saying, “So the tariff there was used as here in part as leverage to get our trading partners to the negotiating table.” (24, 11-13). SG Sauer later expanded on this point, noting the tariffs “are an incentive, a pressure point, leverage, bargaining chip […] to get countries to change their behavior to address the foreign arising emergencies.” (187, 21-25).

As we have seen since the Executive Order of April 2, 2025, the so-called Reciprocity Tariffs depend on selective discrimination. Each economy was assigned a new tariff rate, despite the difficulty that economists had in understanding the calculation at the time.

Indeed, the whole point of having leverage (regulation over foreign commerce, right?) is to be able to calibrate those tariffs and other prohibitions to each economy. But, implicitly, leverage implies that the rates will move, depending on the progress of the negotiations.

Turning to Section 122, as I understand it, the focus has been on the scope of Section 122(a) and whether a plausible interpretation of “balance-of-payments” (BoP) deficits refers to “trade deficits.”  

Another issue worthy of discussion is that Section 122 includes the standard of non-discrimination. What happens if the Trump Administration seeks selective discrimination? Can Section 122 enable the Executive to implement varied tariff rates and other import restrictions? In this regard, Sub-paragraph (d)(1) commits all import restrictions imposed for BoP purposes to be applied in a non-discriminatory manner:

(d)(1) Import restricting actions proclaimed pursuant to sub-section (a) shall be applied consistently with the principle of non-discriminatory treatment. In addition, any quota proclaimed pursuant to subparagraph (B) of subsection (a) shall be applied on a basis which aims at a distribution of trade with the United States approaching as closely as possible that which various foreign countries might have expected to obtain in the absence of such restrictions.

That seems to defy the leverage sought by the Trump administration. Sub-paragraph (d)(2) confirms a President may only “exempt all other countries from such action” should they assert “one or more countries” are the focus of the action:

(2) Notwithstanding paragraph (1), if the President determines that the purposes of this section will best be served by action against one or more countries having large or persistent balance-of-payments surpluses, he may exempt all other countries from such action.

Moreover, the United States may only apply quotas to match trade distribution “as closely as possible that which various foreign countries might have expected to obtain in the absence of such restrictions.” For close trade lawyer watchers, you may be thinking about the lessons from GATT Article XIII:2.

Subparagraph (e) confirms that the application of import restrictions shall be “broad and uniform.” The full text is here:

(e) Import restricting actions proclaimed pursuant to sub-section (a) shall be of broad and uniform application with respect to product coverage except where the President determines, consistently with the purposes of this section, that certain articles should not be subject to import restricting actions because of the needs of the United States economy. Such exceptions shall be limited to the unavailability of domestic supply at reasonable prices, the necessary importation of raw materials, avoiding serious dislocations in the supply of imported goods, and other similar factors. In addition, uniform exceptions may be made where import restricting actions will be unnecessary or ineffective in carrying out the purposes of this section, such as with respect to articles already subject to import restrictions, goods in transit, or goods under binding contract. Neither the authorization of import restricting actions nor the determination of exceptions with respect to product coverage shall be made for the purpose of protecting individual domestic industries from import competition.

Would we interpret that term “uniform” as referring to universal or stable – as in, not changing every other week? Note further that such restrictions shall not apply to “articles already subject to import restrictions, goods in transit, or goods under binding contract.” In addition, there can be no exception for “the purpose of protecting individual domestic industries from import competition.” Thus far, a significant strategy of this administration has been to implement expansive tariffs and carve out from the sweeping scope afterwards.

I cannot provide an exhaustive assessment in the post. My caveat is that the authority to impose tariffs per Section 122 of the 1974 Trade Act should be subject to a more rigorous interpretation, taking into account past practices and legislative history.