President Trump Cannot Legally Impose Tariffs Using Section 122 of the Trade Act of 1974
Equal justice apparently isn't equal anymore.
Bryan Riley argues that Section 122, which President Trump is using to impose 10% tariffs after the SCOTUS decision in the IEEPA case, is effectively obsolete under a floating exchange-rate system.
Section 122 does not define the phrase “fundamental international payments problems.” However, its meaning is clear from historical context. The provision was designed to address international payments crises that may arise under systems of fixed or managed exchange rates.
Under the Bretton Woods system that was adopted after World War II, most of our trading partners pegged their currencies to the U.S. dollar, which the United States would maintain at a value of $35 per ounce of gold. But, by the late 1960s, there wasn’t enough gold in Fort Knox to cover the growing volume of dollars held abroad. This created a problem that came to a head in 1971, when European nations and Japan began converting their dollar holdings into gold.
President Nixon responded on August 15, 1971 by ending the gold standard and imposing a temporary 10% surcharge on imports to protect against a possible surge of imports resulting from foreign currencies that were allegedly undervalued. Nixon’s import surcharge was challenged in court as unauthorized under existing law. (It was ultimately dropped that December as part of the Smithsonian Agreement after other countries agreed to strengthen their currencies.)
Section 122 of the Trade Act of 1974, introduced on October 3, 1973, was created in response to these developments. Its purpose was to provide specific statutory guidelines governing the use of such surcharges in the future.
A Congressional Research Service report expresses a similar view.
In 1974, the year Congress passed Section 122, the Senate Finance Committee reported that "under present circumstances [Section 122] authority is not likely to be utilized," possibly referring to the recent collapse of the Bretton Woods system.
Equal justice apparently isn't equal anymore.
Bryan Riley argues that Section 122, which President Trump is using to impose 10% tariffs after the SCOTUS decision in the IEEPA case, is effectively obsolete under a floating exchange-rate system.
Section 122 does not define the phrase “fundamental international payments problems.” However, its meaning is clear from historical context. The provision was designed to address international payments crises that may arise under systems of fixed or managed exchange rates.
Under the Bretton Woods system that was adopted after World War II, most of our trading partners pegged their currencies to the U.S. dollar, which the United States would maintain at a value of $35 per ounce of gold. But, by the late 1960s, there wasn’t enough gold in Fort Knox to cover the growing volume of dollars held abroad. This created a problem that came to a head in 1971, when European nations and Japan began converting their dollar holdings into gold.
President Nixon responded on August 15, 1971 by ending the gold standard and imposing a temporary 10% surcharge on imports to protect against a possible surge of imports resulting from foreign currencies that were allegedly undervalued. Nixon’s import surcharge was challenged in court as unauthorized under existing law. (It was ultimately dropped that December as part of the Smithsonian Agreement after other countries agreed to strengthen their currencies.)
Section 122 of the Trade Act of 1974, introduced on October 3, 1973, was created in response to these developments. Its purpose was to provide specific statutory guidelines governing the use of such surcharges in the future.
A Congressional Research Service report expresses a similar view.
In 1974, the year Congress passed Section 122, the Senate Finance Committee reported that "under present circumstances [Section 122] authority is not likely to be utilized," possibly referring to the recent collapse of the Bretton Woods system.
President Trump Cannot Legally Impose Tariffs Using Section 122 of the Trade Act of 1974
Equal justice apparently isn't equal anymore.
Bryan Riley argues that Section 122, which President Trump is using to impose 10% tariffs after the SCOTUS decision in the IEEPA case, is effectively obsolete under a floating exchange-rate system.
Section 122 does not define the phrase “fundamental international payments problems.” However, its meaning is clear from historical context. The provision was designed to address international payments crises that may arise under systems of fixed or managed exchange rates.
Under the Bretton Woods system that was adopted after World War II, most of our trading partners pegged their currencies to the U.S. dollar, which the United States would maintain at a value of $35 per ounce of gold. But, by the late 1960s, there wasn’t enough gold in Fort Knox to cover the growing volume of dollars held abroad. This created a problem that came to a head in 1971, when European nations and Japan began converting their dollar holdings into gold.
President Nixon responded on August 15, 1971 by ending the gold standard and imposing a temporary 10% surcharge on imports to protect against a possible surge of imports resulting from foreign currencies that were allegedly undervalued. Nixon’s import surcharge was challenged in court as unauthorized under existing law. (It was ultimately dropped that December as part of the Smithsonian Agreement after other countries agreed to strengthen their currencies.)
Section 122 of the Trade Act of 1974, introduced on October 3, 1973, was created in response to these developments. Its purpose was to provide specific statutory guidelines governing the use of such surcharges in the future.
A Congressional Research Service report expresses a similar view.
In 1974, the year Congress passed Section 122, the Senate Finance Committee reported that "under present circumstances [Section 122] authority is not likely to be utilized," possibly referring to the recent collapse of the Bretton Woods system.
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