The Court of International Trade issued a 2-1 opinion last week striking down President Donald Trump’s latest tariff scheme under Section 122 of the Trade Act of 1974. The Section 122 tariffs had been imposed shortly after the Supreme Court struck down the president’s “Liberation Day” tariffs in February — tariffs that had already lost in three lower courts before reaching the justices. Now, the administration has appealed the CIT’s ruling to the Federal Circuit.
The president’s tariffs now stand 0-5 in court. They should be 0-6 before summer is over.
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The president imposed this latest round of tariffs arguing that deficits in the U.S. trade balance — and the current account more broadly — amounted to “large and serious U.S. balance-of-payments deficits” under Section 122. These new tariffs were always a stopgap: by law, Section 122 tariffs are temporary (unless affirmed by Congress) and set to expire in late July.
Yet Congress designed Section 122 for a different purpose than the one the president claims they address, one directly related to the monetary system of fixed exchange rates that existed at the time of the statute’s creation.
Under that system, a “balance-of-payments deficit” — not to be confused, as the president appears to have done, with a “trade deficit” — referred to a situation in which foreign governments holding dollars sought to convert them to gold, leading to a decrease in U.S. reserves. Section 122 provided a temporary, tariff-based remedy for this problem.
The fixed-rate monetary system ceased to exist half a century ago, after it was abandoned by the United States and other major economies in 1973 and overhauled in 1976. Section 122 became an afterthought soon after it became law. Only in 1984 did the Senate Finance Committee suggest invoking the statute to deal with the growing U.S. trade deficit, yet the Reagan administration rejected this idea because foreign investment offset the deficit and, thus, the country did not need to spend reserves to finance it.
Not much has changed since. While the U.S. trade deficit is higher today than in prior decades, the U.S. investment surplus has also increased. Dollars held by foreigners are no longer used to redeem gold reserves but to invest in U.S. financial assets or U.S. businesses. There is also no evidence that the U.S. is failing to attract such investments — the U.S. financial account reached a record surplus in 2025 — or that it is using up its monetary reserves to manage the dollar’s exchange rate.
In short, there is no “balance-of-payments deficit” that justifies invoking Section 122.
At worst, the administration’s rationale for invoking Section 122 would transform the statute from a tool to address rare, specific circumstances to a mechanism for imposing across-the-board tariffs at any time. A president could, as Trump did in February, point to the nation’s trade deficit to impose tariffs while ignoring the nation’s surplus in investment. If courts validate this reading on appeal and Congress fails to reform the statute, the president would have the power to impose sweeping tariffs with very few constraints.
The Constitution is unambiguous: the power to impose tariffs and duties — as well as to regulate international commerce — belongs to Congress. For nearly 150 years, lawmakers exercised this power directly. After the disaster of the protectionist 1930 Smoot-Hawley tariffs, a slow, decadeslong abdication followed: statute by statute, Congress handed that authority to the executive branch, each delegation sold as a narrow measure. The Trump administration’s erratic and costly tariffs have exposed the danger of constitutional imbalance.
The courts have done their job to correct these failures — multiple times. But court victories only go so far. Judges can strike down specific tariffs, but they cannot fix the underlying laws that give presidents the tools to keep trying. As long as those statutes remain on the books — or without serious modifications, such as requiring congressional approval before tariffs can be implemented — the ever-protectionist Trump administration will simply reach for the next legal hook, which is exactly what it has done.
Americans are not fooled. Polling shows they disapprove of the administration’s tariff policies by a wide margin: 60% oppose them, including 39% who strongly disapprove. More than three-quarters say tariffs are bad for the cost of living, and 70% say they hurt Americans’ standard of living. U.S. businesses paid more than $8 billion in Section 122 tariffs in March alone.
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Congress should be listening, especially during an election year. It wrote these laws, expanded them over decades, and only it can truly rein in Trump’s tariff abuses. For now, though, it seems content to leave this work to the courts.
And while the administration’s losing record in court is good for importers, it’s a mark of shame for Congress.
Clark Packard is a research fellow in the Herbert A. Stiefel Center for Trade Policy Studies.
Alfredo Carrillo Obregon is a policy analyst for trade policy at the Cato Institute.