A specialised US trade court is reviewing whether the administration can rely on Section 122 to impose a 10% surcharge after the Supreme Court rejected broader tariff authority
The dispute centers on a newly imposed 10% global import surcharge that took effect on February 24 and the administration’s decision to rely on Section 122 of the Trade Act of 1974 after the Supreme Court limited the use of the International Emergency Economic Powers Act (IEEPA) on February 20, 2026.
A three-judge panel of the U.S. Court of International Trade is hearing oral arguments from a coalition of mostly Democratic states and two small businesses that want the temporary duties blocked rather than allowed to run their statutory 150-day clock.
The plaintiffs contend the measure sidesteps the high court’s ruling and stretches an old statutory power far beyond its intended emergency purpose.
At issue is how to interpret the phrase balance-of-payments deficits in the statute and whether persistent trade shortfalls qualify as the kind of monetary crisis Congress had in mind when it adopted Section 122 in the mid-1970s.
The administration maintains that the surcharge is a lawful response to the country’s ongoing trade deficit and is within the president’s authority to impose temporary duties. Opponents argue that Section 122 was created in a different monetary era — one linked to the Bretton Woods system and concerns about dollar convertibility into gold — and that routine trade imbalances are not the exceptional, short-term emergencies that the statute contemplates.
Historical context and the legal pivot
The legal foundation for Section 122 traces back to actions taken in the early 1970s, when the United States faced global payment pressures under the Bretton Woods framework. In 1971, the Nixon administration announced a 10% surcharge to slow dollar outflows and protect reserve convertibility; Congress later codified similar temporary import duties as Section 122. That provision authorizes surcharges of up to 15% for up to 150 days to address “large and serious United States balance-of-payments deficits” or imminent dollar depreciation. Legal scholars and the courts have debated whether modern trade deficits, recorded primarily in the current account, are equivalent to the earlier concept of a balance-of-payments deficit that would have required official intervention under fixed exchange rates.
The arguments before the court
Plaintiffs’ case
States and two small importers argue that the administration’s reliance on Section 122 misapplies a narrowly tailored emergency power. Counsel for Oregon, Brian Marshall, urged judges to issue a court order rather than let the tariff simply expire after 150 days, warning that allowing a succession of temporary surcharges could permit an indefinite tariff regime through repeated proclamations. The plaintiffs emphasize legislative history and past agency practice to contend that Section 122 was designed to address rare monetary disturbances tied to the era of fixed exchange rates, not ongoing commercial trade deficits driven by ordinary cross-border purchases of goods.
Administration’s defense
The administration argues that the statute’s language is broad enough to cover today’s economic conditions and that the president is lawfully exercising delegated authority to protect the country’s external payment position. White House spokespeople have described the surcharge as a legitimate tool to address persistent imbalances in the United States’ external accounts. Officials also point out that Section 122 contains a built-in temporal limit — 150 days — and that the executive branch intends to use that window to pursue other authorities and investigations that could support long-term trade measures.
Implications and congressional options
The litigation will shape how far a president can go in using rarely invoked trade statutes to impose broad import duties without fresh congressional action. Congress could intervene by extending, terminating, or amending Section 122, or by exercising oversight of any investigations intended to replace the temporary surcharge with other tariff authorities such as Section 232 or Section 301. Another practical avenue is legislative clarification of what constitutes a balance-of-payments deficit in contemporary accounting, a step that would reduce legal uncertainty and define the boundaries of executive power.
Internationally, the United States has notified the World Trade Organization of the measure, as required when implementing tariffs for balance-of-payments reasons, and importers have warned of broader economic consequences. How the Court of International Trade resolves the dispute could determine whether the current 10% surcharge stands for its statutory term, is struck down, or is subject to immediate judicial injunction — a decision with ramifications for trade policy, the separation of powers, and the reach of emergency economic tools enacted in a different monetary era.
