Trump Uses Sec. 122 Tariffs After SCOTUS Ruling. What You Need To Know - Forbes

Trump uses Section 122 tariffs after the Supreme Court ruling. Section 122 tariffs stem from the Trade Act of 1974, during the Nixon presidency. What prompted Congress to draft Section 122 and what is it? How will President Trump use Section 122 in the wake of the Supreme Court ruling? Here’s what you should know about this section of the law.

In August 1971, Nixon announced that the U.S. was abandoning the gold standard and would no longer exchange dollars for gold. Nixon’s action was in response to foreign countries exchanging U.S. dollars for gold at a faster than normal rate. Because much of the world was selling dollars, the value of the dollar fell, making imports more expensive for U.S. consumers. Nixon then added a 10% surcharge (i.e., tariff) to imports to force our trading partners to revalue their currencies against the dollar. This led to a new agreement, the Smithsonian Agreement, which created a new dollar standard. It also limited currency fluctuations against the dollar to 2.25%. This would help stabilize international trade, since the dollar was the world’s reserve currency. After our major trading partners signed the Smithsonian Agreement, Nixon canceled the 10% surcharge.

As a result, many in Congress were uneasy with the power Nixon had exerted. Congress questioned the legal authority of a president to impose a surcharge on imports, believing that the power of taxation was under the purview of Congress. In response, Congress wrote the Trade Act of 1974, which of course, contains Section 122.

Section 122 allows a sitting president to impose a temporary tariff of up to 15% for up to 150 days, without Congressional approval. For a broader view of the implications of the recent Supreme Court ruling, please read my Forbes article published February 23, 2026, “Supreme Court Rules Trump Tariffs Are Illegal. Here’s What To Expect.” Before a president turns to Section 122, one of three conditions must be present. The first is “large and serious United States balance-of-payments deficits.” The second is to prevent an “imminent and significant depreciation of the dollar in foreign exchange markets.” The third condition is “correcting an imbalance in international payments.” For more on Section 122, you may refer to “Section 122 of the 1974 Trade Act Was Designed for Emergencies. Here’s What Congress Actually Intended.”

Are Refunds Coming?

While the Supreme Court ruled that the Trump tariffs under IEEPA are illegal, there was no mention about what to do with the estimated $142-$175 billion in tariffs that was collected in 2025. According to the Committee for a Responsible Federal Budget, refunding this money could add $2.4 trillion to the national debt. Moreover, if refunds are required, it may open a pandora’s box of legal challenges from those who have paid the bill thus far. Some companies may seek to collect more than what is offered. Even if Washington proceeds to issue refunds to U.S. corporation, or foreign corporations, how will these companies refund their customers. Will customers need proof of purchases? Will receipts be required to obtain a refund? Clearly, there are more questions than answers here.

New Tariffs on the Horizon

There are other methods for Trump to impose new tariffs. However, these methods have a defined process and will take time to implement. For example, Section 301 – also part of the Trade Act of 1974, allows the U.S. government to impose tariffs on foreign trading partners that violate trade agreements or engage in unfair trade practices. However, the United States Trade Representative (USTR) must first negotiate with the offending country before implementing tariffs under Section 301.

Another tariff option is under Section 232, which allows tariffs to protect national security. For example, China, Canada, and Mexico were selling steel in the U.S. at a deeply discounted price compared to U.S. steel manufacturers. This threatened an entire industry, allowing for tariffs under Section 232 to be imposed.

What Now?

Until the courts give specific directions about tariff refunds, the administration has no compelling reason to issue them. However, I expect the courts will provide guidance, at least for the companies that have sued the federal government for a refund of tariffs paid. In addition, refunding this money will create some degree of financial distress in the federal budget, which may or may not filter down to U.S. consumers. It will, however, add to the budget deficit, and as mentioned above, increase our national debt substantially.

If the U.S. economy grows at an accelerated rate, and inflation is muted, the increased economic activity may offset some of these issues. Perhaps more importantly is the degree of uncertainty this has created. Yes, it set clearer boundaries for the administration, but since we don’t what Trump will do in response, uncertainty exists. And uncertainty is like kryptonite for businesses. For companies, it’s better to know the rules, even if you don’t like them, so you can plan accordingly. Without certainty, companies cannot make concrete plans and will have to wait and see how things unfold.