Congress Should Retire Section 122

Clark Packard

Last month, I had the pleasure of sitting down with Rep. Jimmy Panetta (D‑CA) at a Cato policy forum focused on Section 122 of the Trade Act of 1974 and the broader question of congressional tariff authority. Preceding our fireside chat, the American Enterprise Institute’s Stan Veuger and Hana Greenberg—who previously served as chief of staff to former Rep. Ron Kind (D‑WI)—joined for a panel on the legality of Section 122, whether the conditions justifying its use actually exist today, and what Congress can realistically do to reassert its constitutional role over trade. 

Late last year, Veuger and I wrote in Foreign Policy that if the Supreme Court struck down the Trump administration’s International Emergency Economic Powers Act (IEEPA) tariffs, Section 122 was an obvious fallback. Sure enough, after the Supreme Court’s February ruling against the IEEPA tariffs in Learning Resources, Inc. v. Trump, the administration quickly pivoted, slapping a 10 percent tariff on nearly all imports under Section 122’s balance-of-payments authority. But, as Veuger and I explained, Section 122 was designed for a world of fixed exchange rates, in which the US dollar was pegged to gold—a world that no longer exists. Invoking it now to address a supposed balance-of-payments crisis strains both the statute and credulity.

My Cato colleague Kyle Handley has also laid out the historical case for why the administration’s Section 122 invocation doesn’t hold up. As he explains in a recent blog post, Section 122 emerged from the Bretton Woods era of fixed exchange rates, when a balance-of-payments deficit could become a direct claim on US gold reserves. Handley notes that French President Georges Pompidou literally sent a ship to New York to retrieve French gold deposits, a vivid illustration of the kind of payments crisis the statute was actually designed to address. Under today’s floating exchange rate system, no such problem exists—trade deficits are simply mirrored capital inflows. Handley also shows that the current account deficit in 2024, measured as a share of GDP, is not historically unusual and was well below the peaks registered in 2002–2008. Not even then did presidents declare a balance-of-payments emergency. As Handley, who also signed an economists’ amicus brief in support of plaintiffs challenging the Section 122 tariffs in the US Court of International Trade, surmises: “If ‘balance-of-payments deficits’ can be redefined to mean some politically salient trade imbalance, then Section 122 stops being a narrow emergency provision designed for a fixed-exchange-rate system and becomes a standing reservoir of discretionary tariff authority.”

Some members of Congress, meanwhile, are taking actions of their own. Rep. Panetta has since introduced a bill that takes direct aim at the administration’s use of Section 122. He recently introduced the Stop Global Tariffs Act, co-led by Rep. Don Bacon (R‑NE) and Ways and Means Trade Subcommittee Ranking Member Linda Sánchez (D‑CA). The bill does three things: (1) strikes down the current Section 122 10 percent global tariffs, (2) requires that importers already harmed by those duties be reimbursed, and (3) prevents the administration from relaunching the same tariffs under a new declaration.

As I noted immediately following the Supreme Court’s IEEPA ruling, judicial intervention can only go so far. Courts can strike down specific tariff actions, but they can’t fix the underlying statutory landscape that gives presidents the tools to keep trying. (Plus, there are legitimate questions about how far courts will go in second-guessing presidential determinations of fact that presuppose the invocation of these statutes.) Congress wrote these authorities; Congress expanded and delegated more of them over decades; and Congress is the appropriate institution to claw them back. Legislation like the Stop Global Tariffs Act is exactly the structural remedy that’s needed.

Section 122 was built for a different era, and the administration’s reliance on it signals how legally cornered its tariff agenda has become. The Stop Global Tariffs Act won’t sail through a Republican-controlled House, but its value isn’t contingent on passage. Building the political case for Congress to reclaim its Article I authorities over tariffs and trade starts with legislation like this.

It bears repeating that these tools don’t belong to any one president. The statutory hooks the Trump administration has exploited—IEEPA, Section 122, Section 232 (i.e., “national security” tariffs), and Section 301 (i.e., “unfair trade” tariffs)—would be equally available to any future occupant of the White House, of either party. Congress has spent decades ceding its constitutional authority over trade, and emergency provisions have a way of becoming permanent features of executive power rather than the temporary, narrowly targeted measures they were sold as. Section 122 is the latest chapter in that story. Fixing it requires more than litigation and legislative gestures; it requires Congress actually acting to claw back its constitutional powers.