A provision of U.S. trade law never utilized before could be employed by the incoming Trump administration as part of its stated intent to increase tariffs on imports from China and other countries.
ST&R has previously reported that a number of existing laws authorize the president to unilaterally impose sweeping trade restrictions without substantial procedural or institutional safeguards. Among these is Section 122 of the 1974 Trade Act, which links tariff authorities with U.S. trade deficits.
Specifically, this law allows the president to issue a proclamation imposing an additional tariff of up to 15 percent (or quotas) on imports from countries with which the U.S. has a “large and serious” balance of payments deficit (though the law does not define that term). Tariffs may be imposed quickly, without any related investigation or similar procedures, but may only remain in effect for 150 days. However, Congress may act to extend such tariffs and the law does not appear to restrict how long such an extension may be.
Section 122 generally requires such tariffs to be applied consistent with the principle of non-discriminatory treatment (i.e., imposed on all countries) but does permit the president to limit tariffs to “one or more countries” if desired. The law also allows for some exceptions from any imposed tariffs, including for products that are unavailable domestically at reasonable prices.
The most recent statistics from the Department of Commerce indicate that the largest U.S. trade deficit is currently with China, at $25.5 billion for the month of October. President-elect Trump has pledged to impose 60 percent tariffs on imports from China, and Section 122 could immediately be used as part of that effort.
Other trading partners with which the U.S. ran a large trade deficit in October, and that could therefore potentially be subject to Section 122 tariffs, include Mexico ($15.4 billion), Vietnam ($10.6 billion), Ireland ($9.0 billion), Japan ($6.5 billion), Taiwan ($6.5 billion), and Germany ($5.4 billion). These are also among the countries listed in the Treasury Department’s most recent foreign currency exchange report as having the largest trade surpluses with the U.S. on an annual basis.
For more information on potential Section 122 tariffs and how they may impact your business, please contact Nicole Bivens Collinson at (202) 730-4956 or via email.
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