How is the administration using Section 122?

On the same day the Supreme Court overturned the Trump administration’s tariffs imposed under the International Emergency Economic Powers Act (IEEPA), President Trump announced a new 10% global tariff using a different authority: Section 122 of the Trade Act of 1974. 

For retailers, importers, and other businesses that rely on predictable trade policy, the move was significant. Section 122 had never been used before, by any president. Its sudden use marked the administration’s latest attempt to preserve a broad tariff regime while pursuing other, potentially longer-lasting trade actions. 

Section 122 authorizes the president to impose temporary import duties or surcharges of up to 15% for up to 150 days. The statute allows the president to take that action for one or more of three specific reasons: to address large and serious U.S. balance-of-payments deficits; to prevent an imminent and significant depreciation of the U.S. dollar in foreign exchange markets; or to cooperate with other countries in correcting an international balance-of-payments disequilibrium. 

In practice, the administration used Section 122 as a temporary bridge. After the Supreme Court rejected the use of IEEPA as the basis for sweeping tariffs, the White House turned to Section 122 to keep a broad 10% tariff in place while it continued developing other trade policy tools. That included potential actions under other authorities, such as Section 301 and Section 232, which involve lengthier and more rigorous procedures and legal standards. 

The administration’s Section 122 strategy quickly faced legal challenges. On May 7, a divided panel of the U.S. Court of International Trade (CIT) ruled that the administration had unlawfully used Section 122 to impose the 10% global tariff. 

Importantly, the court did not issue nationwide relief for all importers. Instead, the ruling only applied to the successful plaintiffs: Washington State and two private companies.  

The administration appealed the decision and sought to pause the effect of the CIT’s order while the appeal proceeds. On May 12, the U.S. Court of Appeals for the Federal Circuit granted a stay, allowing the government to continue collecting the tariffs while the litigation continues. That means, for the time being, the Section 122 tariffs continue to be collected despite the trade court’s ruling. 

For retailers, the immediate takeaway is that tariff uncertainty remains high. The Court of International Trade decision was significant because it addressed the first-ever use of Section 122 and rejected the administration’s interpretation of that authority. But because the ruling was stayed on appeal and did not provide broad nationwide relief, it has not eliminated the tariff burden facing importers. 

The broader takeaway is that the administration continues to look for alternative legal pathways to impose tariffs as part of its “America First” trade agenda. Each new action creates additional uncertainty for retailers making sourcing, pricing, inventory, and supply chain decisions months in advance. 

The litigation will continue, and the administration is likely to keep exploring other ways to advance its tariff agenda. Retailers should expect continued volatility and should closely monitor both the appeal and any new trade actions that may follow.