On February 20, the Trump administration announced the imposition of tariffs pursuant to Section 122 of the Trade Act of 1974, a section designed to counteract balance-of-payments crises. A number of helpful articles have since appeared to explain that a trade deficit is not the same thing as a balance-of-payments deficit, let alone the sort of fundamental international payments problem contemplated by the statute. This piece raises a further point as to the applicability of Section 122 tariffs to the current situation. The text of Section 122, along with its legislative history, indicate that these tariffs are mandatory; either the President must impose the tariffs in the face of a balance-of-payments crisis or he must immediately inform Congress that he is choosing not to impose them, among other steps. The mandatory nature of the obligation raises the question—if presidents have had this obligation all along, why is it only being triggered now? As detailed below, either there is no current balance-of-payments crisis, or we are led to some absurd conclusions. 

The text of the statute reveals the mandatory nature of this type of tariff. Section 122 of the Trade Act of 1974 is titled “Balance-of-payments authority.” However, the text of the section itself reveals that in addition to granting the president the authority to impose Section 122 tariffs, Congress also created an obligation on the part of the president. Specifically, Section 122(a) provides that “[w]henever fundamental international payments problems require special import measures to restrict imports,” in certain listed circumstances including “(1) to deal with large and serious United States balance-of-payments deficits,” “the President shall proclaim [emphasis added], for a period not exceeding 150 days (unless such period is extended by Act of Congress)” “(A) a temporary import surcharge, not to exceed 15 percent ad valorem, in the form of duties (in addition to those already imposed, if any) on articles imported into the United States,” or temporary quotas or other limitations on imported items, or a combination of import surcharges and limitations. 

While the president does have the option of declining to impose Section 122 tariffs in the face of these balance-of-payments conditions, he is required to comply with certain measures in doing so. Namely, Section 122(b) provides that “[i]f the President determines that the imposition of import restrictions under subsection (a) will be contrary to the national interest of the United States, then he may refrain from proclaiming such restrictions and he shall”[emphases added] “(1) immediately inform Congress of his determination, and (2) immediately convene the group of congressional official advisers designated under section 161(a) and consult with them as to the reasons for such determination.”

The mandatory nature of this mechanism in Section 122 differs from Section 301, which is provided for in the same law. Namely, Section 301(a)(1) provides for mandatory action on the part of the United States Trade Representative (“the Trade Representative shall take action”) but only once the USTR has determined under section 304(a)(1) that “the rights of the United States under any trade agreement are being denied” or that some “act, policy, or practice of a foreign country” runs contrary to the United States or its commerce in certain specified ways. In contrast, Section 122 does not require any such threshold determination before the presidential obligation to either impose Section 122 tariffs or notify Congress is triggered. 

A legislative history of the statute on this limited point further supports the plain reading of the text that the Section 122 mechanism is a mandatory one. The original House bill provided that “[w]henever the President determines that fundamental international payments problems require special import measures to restrict imports” including “to deal with a large and serious United States balance-of-payments deficit,” “the President is authorized … (A) to proclaim a temporary import surcharge,” along with the authorization to institute quotas. The Report of the House Committee on Ways and Means explaining this section echoed this same language of authorization. The Senate then amended Section 122 to provide for a mandatory presidential obligation instead. The Report of the Senate Committee on Finance (Nov. 26, 1974) (p. 87) indicates that the initial House version of the legislation provided that the President “would be authorized, at his discretion [emphasis added] to impose temporary import surcharges,” whereas the later Senate Committee version provided that “the President would berequired [emphasis added] to impose import restrictions.” In addition, the Senate Committee noted that pursuant to the Senate amendment, “the President would be permitted to refrain from imposing import restrictions if he determines that they would be contrary to the U.S. national interest. If he did not restrict imports, the president would have to inform the Congress and consult with the members of the Senate Finance and House Ways and Means Committees who are to serve as Congressional Advisors under section 161 of the bill, as to the reasons for his determination.” The Senate amendment on this point was accepted by the House and eventually became the text of the enacted statute. 

No president since the statute went into effect has either imposed Section 122 or notified Congress of his decision not to do so. Based on the plain text of the statute and the relevant legislative history, this suggests that one of the following would be true:

• The United States now faces an unprecedented balance-of-payments crisis in which President Trump has determined that he has the obligation to impose Section 122 tariffs. Yet this balance-of-payments crisis was not in existence during either the entirety of President Trump’s first term, or even the first year of this second term, and has only coincidentally come to exist following the February 20 Supreme Court IEEPA tariff ruling. 
• Every president since 1975, including President Trump in his first term, who faced a substantial trade deficit has neglected their presidential duty pursuant to Section 122, and it is only now that President Trump has unearthed this long-forgotten presidential duty; or
• A substantial trade deficit is not the same as the “fundamental international payments problem” contemplated by the drafters of Section 122, and a “fundamental international payments problem” has not existed since at least the effective date of the statute in 1975, and thus both the obligation and authority of a president to enact Section 122 tariffs has never existed. 

Perhaps it goes without saying that the first two possibilities seem quite unlikely. The structure and history of Section 122, therefore, strongly indicates that the last point is the case.  

Christine Abely is an Assistant Professor of Law at the University of New Hampshire Franklin Pierce School of Law. She is a licensed customs broker and previously practiced international trade law.