Twenty-Four States Led by Oregon File Lawsuit Challenging Trump’s Section 122 Tariffs

Today, 24 states led by the state of Oregon filed the first lawsuit challenging Donald Trump’s massive new Section 122 tariffs, which would impose 15% tariffs on most imports from nations around the world. The case is before the US Court of International Trade, which has exclusive jurisdiction over cases challenging tariffs.

I have previously written about why the new tariffs are illegal, much as were the IEEPA tariffs invalidated by the Supreme Court in the case I helped litigate on behalf of the plaintiffs. Here is an excerpt from my recent Boston Globe article explaining why the Section 122 tariffs are illegal:

Section 122 only permits tariffs for up to 150 days in response to “fundamental international payments problems” that cause “large and serious United States balance-of-payments deficits” or “an imminent and significant depreciation of the dollar,” or are to cooperate with other countries in addressing an “international balance-of-payments disequilibrium.”

As conservative legal commentator Andrew McCarthy explained in National Review, none of these legal preconditions to the use of Section 122 exist….

A balance of payments deficit can only arise in a fixed exchange-rate system, like the one the United States had before 1973, when the federal government took part in the Bretton Woods system of fixed exchange rates backed by US gold reserves. In that situation, the United States could experience a shortage of official currency reserves when demand for dollars at the fixed rate increased, or a shortage of gold arose. Since the introduction of floating exchange rates in 1973, that problem has been eliminated. As Nobel Prize-winning monetary economist Milton Friedman explained in 1967, “a system of floating exchange rates completely eliminates the balance-of-payments problem. The [currency] price may fluctuate but there cannot be a deficit or a surplus threatening an exchange crisis.” When Section 122 was enacted in 1974, it was not yet clear whether the flexible exchange rate system would continue indefinitely. Since it did, Section 122 has never been used until now….

The three conservative justices in the majority in [the IEEPA] decision cited…. the “major questions doctrine,” which requires Congress to “speak clearly” when authorizing the executive branch to make “decisions of vast economic and political significance.”

They concluded that IEEPA did not clearly grant the president sweeping tariff authority. But the same is true of Section 122. At the very least, it is far from clear that it authorizes the president to impose 15 percent tariffs on goods from virtually every nation in the world, in a situation vastly different from that which inspired the law. And the effects of Trump’s Section 122 tariffs would be large enough to qualify as a “major question.” Within 150 days, the tariffs would impose some $30 billion in taxes on American businesses and inflict serious damage on the economy by raising prices and disrupting production in industries that depend on imports.

That figure would be much greater if Trump can extend the tariffs after the deadline expires. And if he can claim that “fundamental international payments problems” and a balance of payments deficit exist even when they obviously do not, he could likely reimpose the tariffs indefinitely, simply by issuing a new proclamation soon after the prior one expires.

Elsewhere in the article, I also explain why these tariffs violate the nondelegation doctrine.

I am far from alone in concluding that the Section 122 tariffs are illegal. As noted above, Andrew McCarthy takes the same view. See also these more extensive analyses by Phil Magness and Marc Wheat  in National Review and and Stan Veuger and Clark Packard in Foreign Policy, among others.

Oregon also led the state lawsuit challenging the earlier IEEPA tariffs, which was eventually consolidated with our own. I commend Oregon Attorney General Dan Rayfield and Solicitor General Ben Gutman for their leadership in this important cause.

I will almost certainly have more to say about this case later. It is also likely this will not be the only lawsuit challenging the new tariffs.