In the immediate aftermath of the U.S. Supreme Court’s ruling that President Trump lacked authority to impose tariffs under the International Economic Emergency Powers Act (IEEPA), the President defiantly issued an Executive Order imposing new global 10% tariffs (later raised to 15%) in reliance on the Section 122 of the Trade Act of 1974. No President previously has used Section 122 to impose tariffs. Now a coalition of 24 states’ Attorneys General and Governors has filed a lawsuit in the United States Court of International Trade against the President and certain of administration officials challenging the President’s Section 122 tariffs. The plaintiffs argue that the circumstances under which the President has authority under Section 122 to impose tariffs not only does not exist now, but has not existed for over 50 years following changes in the global monetary exchange system in the 1970s. The likelihood is that the President will have to find yet another basis on which he can impose tariffs – which he seems likely to continue to try to do.

The State AGs’ March 5, 2026, lawsuit can be found here. The Wall Street Journal’s March 5, 2026 article about the lawsuit can be found here. The Maryland Attorney General’s March 5, 2026 press release about the lawsuit can be found here.

Background

Congress enacted Section 122 in order to provide the President with limited tariff authority to address “fundamental international payments problems” that require “special import measures to restrict imports” to deal with “large and serious balance of payments deficits.” President Trump has invoked his authority under Section 122 in reliance on the alleged existence of purported “balance of payments deficits.”

 A balance of payments crisis, in the form of a currency crisis, was of great concern to Congress when it enacted Section 122. Large deficits in the balance of payments in the U.S. accrued in the early 1970s owing to the antiquated fixed rate exchange system that had been in effect since the 1940s. The deficits were largely due to the shortage of U.S. gold reserves owing to the convertibility of dollars into gold. The underlying problem was addressed in 1976 when the U.S. returned to a floating rate exchange system. As economist Milton Friedman put it (in a statement that the State AGs quote in their complaint) “A system of floating exchange rates completely eliminates the balance of payments problem.”

In other words, Section 122 was intended to address an economic problem that not only does not exist today, but that has not existed for 50 years.

The Lawsuit

The State AGs challenge the President’s Section 122 tariffs on two ground: first, that the “balance of payment” deficit required in order for the President to have authority under the statute to impose the tariffs does not exist; and second, the statute requires the tariffs to be applied in a nondiscriminatory way, yet the tariffs the President has imposed exempts certain countries and includes voluminous product exceptions.

The State AGs argue that the White House has conflated the “balance of payments” required under the statute with the “balance of trade.” While the trade balance is one component of the balance of payments, there are actually three components: the current account (in effect, the component on which the White House relies), the capital account, and the financial account. The White House, the AGs argue, “ignores the balance, so to speak, of the balance of payments: foreign capital and financial investment inflows into the United States.” These funds represented over $1.2 trillion in 2025. When these funds are taken into account, as they must in order to calculate the balance of payments, the U.S.’s balance of payments deficit amounts to $53 billion – or, as the complaint puts it, “0.2% of the United States’ GDP – essentially a rounding error.”

In presenting its argument that the President’s Section 122 tariffs are unlawful, the State AGs complaint argues as follows: “Contrary to the purpose and limited delegation of Section 122, President Trump invoked this statute to impose immense and ever-changing tariffs on whatever goods entering the United States he chooses and for whatever reasons he finds convenient. As with his unlawful use of the IEEPA, the President has once again exercised tariff authority that he does not have – involving a statute that does not authorize the tariffs he had imposed – to upend the constitutional order and bring chaos to the global economy.”

Finally, the State AGs argue that the President’s Section122 tariffs are inconsistent with the requirements that tariffs under the provision must be applied according to the “principle of nondiscriminatory treatment.” Among other things, the White House’s Executive Order on the Section 122 tariffs exempts many goods from a list of countries, including Canada, Mexico, and several Central American countries, and includes more than 80 pages of product exceptions.

The President’s attempt to use Section 122, the State AGs argue, is “as lawless as his prior use of the IEEPA.” In both instances, the policy is the same – “an exercise of completely unrestrained executive powers in an attempt to usurp the taking power that the Constitution vests in Congress, not the President.”

Discussion

Tariffs are President Trump’s favorite trade, diplomatic, and economic tool. President Trump has shown a consistent enthusiasm for trying to use tariffs as a way to bludgeon those he opposes or whom he perceives as opposing him.  The difficulty for the President is that the Constitution gives the taxing power, including the authority to impose tariffs, to the Legislative Branch, not to the Executive Branch.

To be sure, in various statutes, Congress has delegated tariff authority to the President. Unfortunately for the President, these statutory tariff power delegations are never quite as broad, comprehensive, and flexible as the President would want.

Section 122 itself is an illustration of the limitations of Congress’s delegation of tariff authority. First of all, the Section 122 tariffs are only temporary. They expire in 150 days. They can only be imposed under specific circumstances, not whenever the President wants, and the required circumstances most assuredly do not exist today. And the Section 122 tariffs cannot be used to punish opponents, but must be applied uniformly.

Will the State AGs prevail in their lawsuit? The problem for everyone – the State AGs and the White House – is that the lawsuit seems unlikely to work its way through the courts including all appeals before the 150 day time period runs out. What happens after 150 days? It seems likely that President will seek other bases on which to try to impose tariffs.

For example, and as discussed in Princeton Professor Alan Blinder’s March 9, 2026, op-ed column in the Wall Street Journal (here), the President may seek to impose tariffs under Section 232 of the U.S. Trade Expansion Act of 1962, which gives the President authority to deal with trade issues that “threaten to impair” national security. Invoking the law requires a recommendation from the Commerce Department. But, as Blinder notes in his column, “Mr. Trump claims to find threats to national security everywhere, and I’m sure Secretary Howard Lutnick will happily accommodate Mr. Trump’s hallucinations.” Blinder also notes that the President may also seek to impose tariffs under Sections 201 and 301 of the Trade Act of 1974.

In other words, President Trump may have a variety of alternative means to continue to try to use tariffs as a tool of trade, diplomacy, and economics. Notwithstanding the U.S. Supreme Court decision striking down President Trump’s IEEPA tariffs, and notwithstanding the State AGs lawsuit challenging the Section 122 tariff, it seems likely that global trade and the U.S. economy will continue to be burdened with the President’s tariffs, regardless of what authority the President seeks to use in order to impose the tariffs.