---
title: "Trump's tariff \"Plan B\" is questioned, experts say the current state of the U.S. economy does not meet the \"Clause 122\""
description: "Trump activated Article 122 to impose a maximum 15% tariff, replacing the rejected IEEPA proposal. However, economists point out that the U.S. economy shows no symptoms of an \"international balance of"
type: "news"
locale: "en"
url: "https://longbridge.com/en/news/276693021.md"
published_at: "2026-02-24T06:46:38.000Z"
---

# Trump's tariff "Plan B" is questioned, experts say the current state of the U.S. economy does not meet the "Clause 122"

> Trump activated Article 122 to impose a maximum 15% tariff, replacing the rejected IEEPA proposal. However, economists point out that the U.S. economy shows no symptoms of an "international balance of payments crisis," which does not meet the legal threshold, and the Department of Justice has explicitly rebutted its applicability, facing legal challenges. Although the 150-day implementation period may delay the ruling, this move essentially tests the limits of expanding executive power

According to Xinhua News Agency, after the U.S. Supreme Court rejected the White House's attempt to impose tariffs using the International Emergency Economic Powers Act (IEEPA), the Trump administration quickly launched "Plan B," invoking Section 122 of the Trade Act of 1974 to impose a maximum 15% tariff on global imports.

However, this emergency tool aimed at addressing the "balance of payments crisis" is facing widespread skepticism regarding its legality from economists and legal experts, **the core controversy lies in the fact that the current economic fundamentals of the United States do not meet the statutory applicability threshold of this provision.**

According to Axios, the Trump administration's basis for invoking this provision is the existence of a "huge and serious" trade and balance of payments deficit, which includes a negative $26 trillion "net international investment position." In a fact sheet released by the White House on Friday, it warned that if these international payment issues are not resolved, it would jeopardize the U.S. ability to finance its expenditures, erode investor confidence, and pose a threat to the U.S. economy and national security.

Despite the White House's tough stance, market and legal experts point out that the U.S. has not exhibited typical symptoms of a balance of payments crisis, such as currency collapse, soaring interest rates, or a freeze on foreign capital inflows. RSM Chief Economist Joe Brusuelas stated in a report that **the current situation does not meet the standards set forth in Section 122 from the perspective of the U.S. economy, balance of payments, or monetary system.**

Although this new tariff measure grants the president the power to impose taxes directly bypassing the investigation process, it is also shackled by legal constraints of a "15% tax rate cap" and a "150-day validity period." Dave Townsend, an international trade lawyer at Dorsey & Whitney, pointed out that **given the enormous amounts involved, a new wave of lawsuits challenging Section 122 is expected, with businesses seeking refunds for tariffs that have already been imposed.**

## **The Justice Department's "Self-Denial" and Legal Obstacles**

The Trump administration's invocation of Section 122 is facing challenges from its own legal team's previous statements. According to Axios, last year, Assistant Attorney General Brett Shumate of the U.S. Department of Justice explicitly refuted the idea of using Section 122 as a basis for imposing tariffs in a briefing.

At that time, the Justice Department's documents indicated that the emergency concerns identified by the president stemmed from the trade deficit, which is conceptually distinct from the balance of payments deficit, and emphasized that Section 122 has "no apparent applicability" in this context. This prior legal stance may now serve as a strong basis for challenging the legality of the White House's decisions in the new round of lawsuits.

Nevertheless, the time lag in practical operations may benefit the Trump administration. Analysts point out that **it is difficult for the courts to make a final ruling on the legality of the tariffs under Section 122 within the 150-day period allowed by the regulations.** This grants the Trump administration more time to utilize more established legal authorizations under Section 232 and Section 301 to seek the formulation of more specific tariff measures under the justifications of national security and unfair trade practices

## **The Economic Logic Paradox Behind the Deficit Data**

According to an article from Wall Street News, to justify the necessity of tariffs, Trump specifically mentioned the United States' staggering negative $26 trillion "Net International Investment Position" (NIIP) in a presidential announcement, which is the difference between U.S. assets held abroad and foreign assets held in the U.S., to support the claim that the international balance of payments is deteriorating.

However, economists do not buy this attribution. Relevant analyses point out that a significant reason for the negative NIIP is that the value of U.S. assets held by foreigners is significantly higher than that of overseas assets held by the U.S., and the rise of the U.S. stock market—which Trump viewed as a "vote of confidence" in his policies—has actually been a major driver of the expanding negative NIIP. Moreover, if tariffs successfully encourage foreign companies to increase their investments in the U.S., this negative value may further expand.

Most economists believe that there is no so-called "crisis" unless there is evidence showing that the U.S. cannot pay its bills or fulfill its obligations to international investors. If a real international balance of payments crisis were to occur, financial markets would sell off U.S. assets, and the dollar would plummet due to a collapse of confidence, but this is not the current state of the U.S. market.

## **Policy Game Under a 150-Day Deadline**

Unlike the tariff tools previously attempted by Trump, Section 122 of the Trade Act of 1974 grants the president the power to act directly without waiting for federal agency investigations, aimed at addressing "huge and serious U.S. international balance of payments deficits" or "significant depreciation of the dollar imminent." The history of this provision dates back to the "Nixon Shock" of 1971, primarily used to force other countries to renegotiate exchange rates.

However, the limitations on executive power under this provision are also very clear: the maximum tariff rate cannot exceed 15%, and the implementation period is limited to 150 days. To extend the execution, congressional approval is required. This means that even if new tariffs are implemented in the short term, their sustainability has already been written into a countdown in the legal text.

Although, according to international rules, imposing tariffs on the grounds of an "international balance of payments crisis" typically requires notification to the World Trade Organization (WTO), and it is the WTO that judges whether the measures are appropriate. However, in the context of the U.S. having substantially weakened the operational capacity of the WTO dispute resolution mechanism, the international constraints have become largely symbolic. Dave Townsend of Dorsey & Whitney believes that the White House's sudden use of Section 122 is a signal indicating that it will continue to expand the legal boundaries of executive authority on tariff and trade issues

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> **Disclaimer**: This article is for reference only and does not constitute any investment advice.