The 2–1 ruling rejected the president’s attempt to equate a balance-of-payments deficit with a trade deficit.
The United States Court of International Trade (CIT), in a 2–1 ruling, has invalidated the tariffs President Trump imposed in purported reliance on Section 122 of the 1974 Trade Act. The president imposed the tariffs — basically, 10 percent across the board, with various exceptions — after excoriating the Supreme Court for invalidating the tariffs he capriciously imposed and amended in purported reliance on the 1977 International Emergency Economic Powers Act. (See Learning Resources v. Trump [February 20, 2026] and NR’s editorial.)
After the president decreed the new tariffs following the Supreme Court’s decision, I argued that they, too, were illegal.
In Section 122, under the peculiar conditions that existed right after the Bretton Woods system broke down and the U.S. went from a fixed dollar valuation (pegged to gold) to a floating valuation, Congress delegated the president limited authority to impose tariffs “to deal with large and serious balance-of-payments deficits” (emphasis added) (see Section 122, codified at Section 2132 of Title 19, U.S. Code, titled “Balance-of-payments authority”). In essence, the Trump administration tried to redefine “balance-of-payments” to mean “balance-of-trade; from there, because the U.S. runs a trade deficit in goods (imports are greater than exports), the president claimed the authority to impose the tariffs.
As explicated in my post, balance-of-payments and balance-of-trade measure different things. The latter is a part of the former. The balance-of-payments accounts for all economic transactions between the U.S. and the rest of the world.
The CIT majority opinion was written by Chief Judge Mark A. Barnett and Judge Claire R. Kelly, both Obama appointees. Judge Timothy C. Stanceu, a Bush-43 appointee, dissented.
The opinions are dense with accounting jargon and legislative history. The bottom line is that the majority concluded that the term balance-of-payments had to be construed as Congress meant it in 1974. For the majority, that was a “measurement of liquidity, official settlements, and basic balance.” While there might be arguments for considering other metrics, the majority observed that Congress discussed the balance-of-trade in another subsection of Section 122; it was thus doubly obvious that balance-of-payments and balance-of-trade were not synonymous.
In dissent, Judge Stanceu forcefully disputed the majority’s interpretation of the legislative history and concluded that Congress did not settle on a firm, closed set of metrics in defining balance-of-payments (and, indeed, it included no such definition in the statute). He posited that the government measures balance of payments differently today than it did in 1974, that the majority’s rigid formula was obsolete, and that it was not the judiciary’s place to instruct the executive on what and how to measure.
In the majority’s view, however, Judge Stanceu’s permissive construction of balance-of-payments would amount to the same kind of open-ended delegation of Congress’s power that the Supreme Court found problematic in Learning Resources. By construing balance-of-payments less flexibly, the majority concluded it avoided confronting the question of whether Section 122 was constitutionally infirm.
I assume the administration will appeal.