The Trump Administration is trying to sell the latest tariff battle as a response to trade imbalances and foreign economic pressure, but the actual issue is largely domestic. Indeed, the most recent ruling in Burlap and Barrel, Inc. v. Trump demonstrates that the question at hand is whether the president can levy taxes on Americans by rebranding his perceived economic grievances as a statutory emergency. After its first defeat on major tariff theory in Learning Resources, Inc. v. Trump, the Administration turned to Section 122 of the 1974 Trade Act to impose a broad 10% surcharge on a swath of import categories. However, the problem with the President’s argument is simple. Section 122 isn’t a blank check and is rather narrow in its application, focused on specific balance-of-payments problems. The White House’s attempt to use it as a standing license to tax imports on whatever deficit it dislikes is illegal, and the Court of International Trade was right to say so.
Congress created Section 122 to allow for temporary import restrictions in specific, limited conditions. It defines “emergency” to include “fundamental international payments problems” and “large and serious United States balance-of-payments deficits.” This language is important because it reveals a lot about the time in which it was written. In the 1970s, legislators were just dealing with the fallout of the Bretton Woods system. This meant major dollar pressure, fixed exchange-rate instability, and international payments crises. The statute was never written to be a permanent tax tool. Today’s floating exchange-rate system simply doesn’t produce the kind of payments crises Section 122 was intended to answer. Obsolete statutes aren’t blank checks to be wielded at the whim of the executive.
President Trump has decided to ignore that distinction. Instead, his Administration has intentionally introduced a fog of ambiguity to allow the goods trade deficit, primary income, secondary income, the current account, and the net international investment position to all qualify as justifications for intervention. Yet, this maneuver should be seen for what it is. The President essentially has taken a set of trade statistics and paraded them out as proof of a statutory balance-of-payments problem, using it as a hook to circumvent congressional approval on a nationwide tariff.
Fortunately, the Burlap and Barrell court saw through this abstraction. It held that the Administration’s proclamation failed to identify the specific “balance-of-payments deficits” Congress intended Section 122 to address. Even accepting the Administration’s factual claims, the Court concluded that the President had substituted trade and current-account deficits for an actual statutory trigger. This was an important move; the Court did its job as part of our constitutional system of checks and balances. The Framers intended the judiciary to prevent the executive from abusing congressionally delegated authorities through broad interpretations of narrow legislation. While the White House may berate the judiciary for disagreeing with its policy, the Court, in this instance, did the right thing to maintain the balance of powers.
The government’s case is especially weak in this instance because it would essentially make Section 122 limitless. Since trade deficits are common and current-account concerns can be framed broadly, if this were enough to trigger Section 122, almost any president could declare a balance-of-payments problem and impose tariffs across the economy. Once the 150-day period runs out, the president could then identify a new problem and restart the cycle all over again. There is nothing “emergency” about transferring Congress’s authority broadly to the executive without meaningful limitations.
That the Administration tried this at all should worry anyone who cares about constitutional governance. At the end of the day, tariffs, no matter the posturing, are taxes. They are remitted by importers but usually passed on to consumers and eventually felt throughout the economy, bringing higher prices and fewer options. The Constitution explicitly says that “Congress shall have Power To lay and collect Taxes[.]” In this area, the President can only exercise those powers Congress has actually given to him. The discovery of a vast, new taxing power—justified by the executive effectively as a matter of political convenience—is essentially a revival of taxation without representation. Tariffs are not merely negotiating tactics. Taxes are a form of coercion through price. In this instance, they seek to make goods more expensive through state order and, in the process, punish the businesses and their consumers that rely on foreign products.
Average Americans are told by the government that their economic choices can be taxed because the president wants to “rebalance trade”, yet the Administration’s tariff exemptions are telling. Certain products, like raw materials and resources tied to supply concerns, were carved out because of the needs of the U.S. economy. In other words, even the White House recognizes that tariffs can damage supply and raise costs for those American firms that are dependent on imports. The only difference between the exempted industries and the rest of the civilian economy is whether the White House thought it was important to protect them from its own destructive policy.
If lawmakers want to impose broad tariffs, they can vote for it in Congress and answer their constituents. That this hasn’t occurred, and that the President is seemingly avoiding the legislature, tells you exactly how any vote would go. Still, President Trump has not quit. His recent appeal of the Burlap and Barrel decision demonstrates he is still chasing bad policy through executive action. Still intent on carrying out his tariff regime despite two separate court rulings, the administration is now pursuing tariffs under Section 301 and 232. Losing under one statute shouldn’t provide an opportunity to scour the U.S. Code for the next chance to label his policy goals an emergency response. Now consolidated with Oregon v. Trump, the Federal Circuit should affirm the Burlap and Barrel ruling and prevent the President from dodging the legislature.
Burlap and Barrel is a victory for liberty because it upholds the principle that Americans shall not be taxed by unilateral decree. Trade policy can be debated, but when the president tries to impose a sweeping tax without constitutional authority, it is the duty of the courts to say no. That is exactly what the Court of International Trade did. By recognizing that Section 122 has limits, it prevents trade deficits from being the magic word used to expand executive power. While the President may wish he could tax by decree, the Founders intentionally gave that power to Congress.
Liam Childers is a policy intern at Americans for Prosperity.
