Expert in international trade and constitutional law, Donald Gainsborough is currently at the helm of Government Curated, where he navigates the complex intersection of policy and legislation. Following the Supreme Court’s recent decision to strike down the “Liberation Day” tariffs, the executive branch has pivoted to Section 122 of the Trade Act of 1974, a move that has sparked intense legal debate among attorneys general and trade experts alike. This transition introduces a host of unprecedented challenges, from the technical definition of financial deficits to the limits of executive authority under time-sensitive statutes. The following discussion explores the legal viability of these replacement tariffs, the degree of judicial deference the President might expect, and the strategic maneuvers available to the White House as it faces a coalition of twenty-four states and various libertarian groups in the Court of International Trade.
The Supreme Court recently ruled that the International Economic Emergency Powers Act does not grant the authority to impose broad tariffs. How does shifting to Section 122 change the legal burden of proof, and what level of deference do you expect courts to show regarding economic “emergency” declarations?
The shift to Section 122 fundamentally alters the battlefield because the court is no longer looking at whether the President has the power to tax—the statute explicitly mentions tariffs—but rather whether the factual “predicate condition” for that power has been met. Under the previous IEEPA litigation, the court avoided the “emergency” question entirely by ruling the power didn’t exist, but now judges must decide how much to second-guess the President’s conclusion that a “large and serious” problem exists. I expect the courts’ initial instinct will be to defer to the executive branch on the gravity of the situation, as determining what is “large” or “serious” is often viewed as a political or economic judgment rather than a strictly legal one. However, with twenty-four states already filing briefs to strike down the 10 percent tariffs, the pressure on the Court of International Trade to demand concrete evidence is higher than ever. We are essentially waiting to see if the judiciary will treat the President’s declaration as an unassailable fact or if they will pull back the curtain to see if the “emergency” is merely a policy preference in disguise.
Section 122 references a “balance of payments” deficit without providing a formal definition. How do you distinguish between a balance-of-payments deficit and a standard trade deficit in a legal context, and what are the specific risks if a court finds these two terms are not interchangeable?
In a legal context, a balance-of-payments deficit is a “term of art” rooted in international financial accounting, typically involving a nation’s total transactions with the rest of the world, including capital transfers and foreign currency adjustments. A standard trade deficit is much narrower, focusing simply on the gap between imported and exported goods, which many experts argue does not meet the statutory trigger for Section 122. The risk for the administration is massive; if a court rules these terms are distinct, the entire legal foundation for the tariffs collapses because the President would be using a tool designed for currency crises to fix a commercial trade imbalance. Even the Justice Department’s own attorneys admitted last June that trade deficits are “conceptually distinct” from balance-of-payments issues, an admission that challengers are now using as a primary weapon in their briefs. If the court adopts this strict accounting definition, the 10 percent and proposed 15 percent hikes would be viewed as a “fast one” pulled by the executive, leading to an immediate invalidation of the taxes.
While statutory requirements call for tariffs of “broad and uniform application,” many policies include extensive carve-outs for specific nations and consumer goods. How might these exemptions undermine the legal standing of the tax, and what are the procedural steps for a court to potentially sever these exceptions?
The inclusion of 88 pages of exemptions—covering everything from Mexican and Canadian imports to prescription drugs and cars—creates a glaring contradiction with the law’s demand for “uniform application.” Opponents argue that by picking winners and losers among trading partners like Costa Rica or El Salvador, the President has violated the very text of the authority he is invoking. Procedurally, if a court finds these carve-outs illegal, it faces a difficult choice: it could strike down the entire tariff regime as non-uniform, or it could “sever” the exceptions, effectively making the 10 percent tariff apply to everyone, including those previously exempt. The White House is actually pushing for the latter “fallback” position in its proclamation, hoping to keep the broader tax alive even if the specific favors are wiped out. However, this creates a political nightmare, as it would suddenly spike prices on food and medicine that the administration specifically promised to protect, likely leading to even more aggressive preliminary injunction requests from impacted industries.
Section 122 tariffs carry a mandatory 150-day expiration unless extended by Congress. Since legal proceedings often take over a year, what strategic options does the executive branch have to maintain these taxes, and could re-issuing a modified version of the same tariff survive a judicial challenge?
The 150-day “short fuse” is a major hurdle, as the current tariffs are set to expire on July 24, long before a final Supreme Court ruling would likely be handed down. To maintain these taxes, the executive branch’s primary strategy is to rely on the slow pace of the judiciary; they are betting that even if lower courts rule against them, they can secure “stays” that allow them to keep collecting duties while the appeals play out. There is also the controversial “double-dipping” option where the President might attempt to re-issue a slightly modified version of the tariff for another 150 days right after the first one expires. Most legal scholars, including those at Stanford, believe this is an impermissible loophole because the statute clearly intends for Congress to take over after the initial five-month period. If the President tries to “re-declare” the same emergency to bypass Congress, he would likely face a stinging rebuke from judges who view such actions as a direct assault on the separation of powers.
What is your forecast for the future of these tariff-related legal battles?
I forecast a period of intense procedural maneuvering where the “battle of the clock” becomes just as important as the constitutional arguments. Given that the Court of International Trade has set arguments for April 10, we will see an immediate push for preliminary injunctions to halt the collection of duties before the July expiration date. Ultimately, I believe the courts will be forced to address the “balance of payments” definition head-on, and the administration’s previous admissions that trade deficits are different will prove to be their Achilles’ heel. While the President is projecting 100 percent confidence, the complexity of these 1974 trade laws means the opinions will be longer and more technical than the previous IEEPA case, likely resulting in a ruling that significantly narrows the President’s ability to act without explicit Congressional consent. Expect a summer of high-stakes litigation that will determine whether the executive can unilaterally reshape the American economy under the guise of an accounting emergency.
