(Resends to fix formatting error)<\/p>\n
By Andrea Shalal and David Lawder<\/p>\n
Feb 24 – President Donald Trump’s promised temporary 15% tariffs to replace those struck down by the U.S. Supreme Court are meant to resolve a problem that many economists say does not exist: a U.S. balance of payments crisis, making them potentially vulnerable to new legal challenges.<\/p>\n
Hours \u200cafter the high court on Friday struck down a huge swath of tariffs Trump had imposed under the International Emergency Economic Powers Act, the president announced the new duties under Section 122 of the \u200cTrade Act of 1974 — a never-used statute that even his own legal team dismissed as irrelevant months ago.<\/p>\n
An initial 10% tariff came into effect at a minute past midnight on Tuesday, according to a customs notice, and it was unclear when the \u200bpromised increase to 15% would take effect. So far, Trump has only signed an executive order for the 10% tariff.<\/p>\n
The Section 122 law allows the president to impose duties of up to 15% for up to 150 days on any and all countries to address “large and serious” balance-of-payments deficits and “fundamental international payments problems.”<\/p>\n
Trump’s tariff order argued that a serious balance of payments deficit existed in the form of a $1.2 trillion annual U.S. goods trade deficit and a current account deficit of 4% of GDP and a reversal of the U.S. primary income surplus.<\/p>\n
Some economists, including former International Monetary Fund First Deputy Managing Director Gita Gopinath, disagreed with the \u200cTrump administration’s alarm.<\/p>\n
“We can all agree that the U.S. is not facing a \u2060balance of payments crisis, which is when countries experience an exorbitant increase in international borrowing costs and lose access to financial markets,” Gopinath told Reuters.<\/p>\n
Gopinath rejected the White House’s claim that a negative balance on the U.S. primary income for the first time since 1960 was evidence of a large and serious \u2060balance of payment problem.<\/p>\n
She attributed the negative balance to a large increase in foreign purchases of U.S. equities and risky assets over the past decade, which outperformed foreign equities over this period.<\/p>\n
Mark Sobel, a former U.S. Treasury and IMF official, said that balance of payments crises are more associated with countries that have fixed exchange rates, and noted that the floating-rate dollar has been steady, the 10-year Treasury yield fairly stable, with U.S. stocks performing well.<\/p>\n
Josh Lipsky, chair \u200bof \u200binternational economics at the Atlantic Council think tank, agreed, noting that a balance of payments crisis occurred when a \u200bcountry could not pay for what it was importing or was unable to \u200cservice foreign debt. That was fundamentally different from a trade deficit, he added.<\/p>\n
Story Continues <\/p>\n
Brad Setser, a currency and trade expert at the Council on Foreign Relations who served as a senior adviser to the U.S. Trade Representative in the Biden administration, took a somewhat contrarian view, arguing in lengthy X posts on Sunday that the Trump administration may have a reasonable case that there is a “large and serious” balance of payments deficit.<\/p>\n
He noted that the current account deficit was far higher than when then-president Richard Nixon erected tariffs in 1971 to address a balance of payments crisis, and the U.S. net international investment position is much worse. This “gives the administration a real argument,” in favor of its tariffs, Setser wrote.<\/p>\n
The White House, U.S. Treasury and U.S. Trade Representative did not immediately respond to requests for comment about the use of Section 122.<\/p>\n
WRONG STATUTE FOR THE JOB<\/p>\n
Despite the Trump administration’s new \u200cfocus on balance of payments, the Justice Department had previously argued that Section 122 was the wrong statute to \u200bhandle a national emergency over the trade deficit.<\/p>\n
In court filings in its defense of IEEPA tariffs, the Justice Department said \u200bSection 122 would not have “any obvious application here, where the concerns the president identified in declaring \u200ban emergency arise from trade deficits, which are conceptually distinct from balance-of-payments deficits.”<\/p>\n
Neal Katyal, who argued at the Supreme Court on behalf of plaintiffs challenging the \u200cIEEPA tariffs, told CNBC that the Trump administration’s stance against the use of Section 122 for a \u200btrade deficit will make those tariffs vulnerable to litigation.<\/p>\n
“I’m \u200bnot sure it will necessarily even need to get to the Supreme Court, but if the president adheres to this plan of using a statute that his own Justice Department has said he can’t use, yeah, I think that’s a pretty easy thing to litigate,” Katyal said.<\/p>\n
It is unclear who might take the lead in challenging the Section 122 tariffs.<\/p>\n
Sara Albrecht, chair of \u200bthe Liberty Justice Center, a nonprofit, public-interest law firm representing several small businesses that \u200cchallenged the IEEPA tariffs, said the group would closely monitor any new statutes being invoked.<\/p>\n
Albrecht did not reveal any future litigation strategy, adding: “Our immediate focus is simple: making sure \u200bthe refund process begins and that checks start flowing to the American businesses that paid those unconstitutional duties.”<\/p>\n
In its ruling, the Supreme Court did not give instructions regarding \u200brefunds, instead remanding the case to a lower trade court to determine next steps.<\/p>\n
(Editing by Jon Boyle)<\/p>\n","protected":false},"excerpt":{"rendered":"(Resends to fix formatting error) By Andrea Shalal and David Lawder Feb 24 – President Donald Trump’s promised…\n","protected":false},"author":2,"featured_media":487708,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[36],"tags":[223363,28,224062,12,101,23984,15304,759,27859,41499],"class_list":{"0":"post-487707","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-balance-of-payments","9":"tag-business","10":"tag-current-account-deficit","11":"tag-donald-trump","12":"tag-economy","13":"tag-gita-gopinath","14":"tag-supreme-court","15":"tag-tariffs","16":"tag-trade-deficit","17":"tag-u-s-treasury"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/487707","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/comments?post=487707"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/487707\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media\/487708"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media?parent=487707"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/categories?post=487707"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/tags?post=487707"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}