--- title: "What does the \"Section 122\" that Trump's 15% new tariffs rely on specifically stipulate?" description: "After the expiration of the old tariff order, Trump activated Section 122 of the Trade Act of 1974, imposing a maximum tariff of 15%. This provision allows the president to quickly raise taxes on the " type: "news" locale: "en" url: "https://longbridge.com/en/news/276668075.md" published_at: "2026-02-24T01:38:52.000Z" --- # What does the "Section 122" that Trump's 15% new tariffs rely on specifically stipulate? > After the expiration of the old tariff order, Trump activated Section 122 of the Trade Act of 1974, imposing a maximum tariff of 15%. This provision allows the president to quickly raise taxes on the grounds of "fundamental issues in the balance of payments," but while it can bypass investigations to impose tariffs directly, it is constrained by a 15% tax rate cap and a 150-day expiration limit. Trump cited a $26 trillion deficit as justification, but experts are not convinced, and a new round of legal battles may be on the way According to Xinhua News Agency, after the U.S. Supreme Court rejected the tariff arrangements previously implemented by the Trump administration under the International Emergency Economic Powers Act (IEEPA), the Trump administration quickly invoked Section 122 of the Trade Act of 1974 to impose a uniform 10% tariff on global imports; Trump subsequently stated that he would raise the rate to 15%. Trump also became the first U.S. president to impose tariffs under Section 122. However, the market is currently more concerned not with "how much" to increase, but rather: how much space does Section 122 actually give the White House, how long can it last, and whether it will again fall into the tug-of-war between the judiciary and international rules. ## **What does "Section 122" stipulate: No investigation required, but "15% cap + 150 days expiration"** According to media analysis, Section 122 grants the U.S. president the authority to impose tariffs on imported goods in the short term to address concerns about imbalances in cross-border capital flows, including two types of situations specified by law: - "**Significant and serious U.S. international balance of payments deficit**"; - "**The dollar is about to experience significant depreciation**". Unlike other tariff tools that Trump might use, a major feature of Section 122 is that the **president can initiate it directly without waiting for federal agencies to conduct a "reasonableness" investigation.** However, the restrictions are also stricter: - The tariff rate is **capped at 15%**; - It can be implemented for a maximum of **150 days**; - If it is to continue beyond 150 days, it must receive **Congressional approval**. This means that even if the tariffs are implemented in the short term, their "sustainability" is written into a countdown in the legal text, and the subsequent situation will highly depend on Congressional attitudes and litigation progress. ## **Why focus on "balance of payments"?** The balance of payments measures a country's overall economic transactions with the world, covering not only goods and services trade but also investments and other financial flows. Traditionally, it has been used to observe a country's ability to fulfill its external payment obligations. Section 122 was written into the Trade Act of 1974, tracing back to 1971 when Nixon announced a 10% tariff on imported goods. At that time, the dollar faced speculative attacks due to its link to gold and was questioned for being overvalued. Nixon's tariffs were part of the "Nixon Shock" combination policy, one of the purposes being to lower import demand and force other countries to renegotiate exchange rates, achieving a real depreciation of the dollar. The tariffs lasted only a few months but also pushed the Bretton Woods fixed exchange rate system towards its end. **The U.S. Congress was concerned at that time about presidential "overreach," so in 1974, Section 122 was written in to impose clearer limits and timeframes on future presidents using tariffs under the guise of "balance of payments issues."** ## **What is the core reason for Trump invoking Section 122? A $26 trillion "deficit"** In the presidential announcement invoking Article 122, Trump stated that tariffs are necessary due to the "huge and serious" trade deficit in the United States, pointing out the net outflow of U.S. overseas investment income, which indicates a deterioration in the U.S. international balance of payments. Media analysis suggests that Trump also targeted the U.S. "Net International Investment Position" (NIIP) — the difference between U.S. foreign assets and foreign assets in the U.S. Currently, this indicator stands at negative $26 trillion, one reason being that the value of U.S. assets held by foreign enterprises and residents significantly exceeds the value of overseas assets held by the U.S. However, reports also note that one point Trump did not mention is that if tariffs encourage foreign companies to increase their investments in the U.S., the negative value of the NIIP may further expand; additionally, the rise in the U.S. stock market (which Trump has viewed as a "vote of confidence") is also a significant reason for the expansion of the NIIP's negative value. ## **Market Controversies and Legal Risks** Economists and policy experts do not buy into Trump's characterization of an "international balance of payments crisis." Most economists believe that even with the president's statement, "there is no evidence to suggest that the U.S. cannot pay its bills or fulfill its obligations to international investors." They argue that if such a crisis were to occur, financial markets would likely sell off U.S. assets, and the dollar would plummet amid a collapse of confidence. Legal risks also exist. Legal experts state that Trump's latest tariffs and their legal basis may once again come under the scrutiny of the Supreme Court, with the key issue being whether Trump's claimed "international balance of payments crisis" can withstand examination. More troubling is that Trump's legal team previously wrote in documents defending IEEPA tariffs: > "The concerns raised by the president in declaring a state of emergency stem from the trade deficit, which is conceptually different from the balance of payments deficit." This statement may, in turn, become a basis for a new round of litigation. On the international level, challenges may also arise. Trade experts point out that imposing tariffs on the grounds of an "international balance of payments crisis" typically requires the U.S. to notify the World Trade Organization (WTO), which would then determine whether the measures are appropriate; if the WTO deems them inappropriate, it may require the U.S. to withdraw the tariffs, potentially involving the International Monetary Fund (IMF) in assessing "whether a crisis exists." However, media commentary also notes that even if it comes to this, the binding force has diminished compared to the past — the U.S. has effectively weakened the operational capacity of the WTO dispute resolution mechanism, making its influence more "symbolic." ## Related News & Research | Title | Description | URL | |-------|-------------|-----| | Trump to tout economy in State of the Union speech, WSJ reports | Feb 23 (Reuters) - U.S. President Donald Trump will use his State of the Union address to tout economic strength and unv | [Link](https://longbridge.com/en/news/276671735.md) | | Bleakley Financial Group LLC Has $6.86 Million Holdings in Micron Technology, Inc. $MU | Bleakley Financial Group LLC reduced its stake in Micron Technology, Inc. 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