A Time Machine and a Bag of Hammers: U.S. Tariffs are not Over

If the White House wants tariffs, but the courts strike down the Reciprocal Tariffs, what other options are out there?

This is the question we asked ourselves and the answer is: there are plenty of other options. If it seems that the White House is wielding the hammer of tariffs where every problem looks like a nail, well, it turns out they have a whole bag of hammers.

We have gamed out the most likely ways that the White House might pursue tariff policies, and we walk through what those might look like, what the likelihood of each tariff regime may be, and what impacts each tariff might have on industry. We present our results below with all the usual caveats,[1] but we think it is important to look clear-eyed at what (and how) tariffs may be coming next because you can bet that someone in the White House is looking at that same thing.[2]

The Current State of Tariffs

On July 8, 2025, the 90-day pause on the Reciprocal Tariffs announced on Liberation Day will come to an end.[3] Currently, reports indicate that August 1, 2025 could be a new deadline for the reimposition of those or similar tariffs.

The reimposition of the Liberation Day would raise tariffs on EU goods to 20%, China to 34%, and Lesotho to 50% (we defer to our favorite analyst to explain the math). It is possible that the pause will be further extended. It is also possible that the tariffs will go into effect, we will see consequences in the markets, and then the pause will be extended. Further speculation is beyond our scope.[4]

A Preliminary Presumption

While we have been wringing our hands over the will-they-won’t-they question of reimposition, several courts have ruled that the imposition of tariffs under the International Emergency Economic Powers Act (IEEPA) is unconstitutional.[5]

Nevertheless, our view (and the basis for this article) is that the White House will continue to view U.S. bilateral trade deficits in goods as a problem. That is, that any time a country sends more goods to the United States than it receives, the President and his close advisors will view the situation as a loss for the United States. For that reason, and for any number of other problems, perceived or substantive, we presume that if a court requires the President to lay down the IEEPA hammer, he will reach into his bag for another one, and continue addressing various nails with that next available implement.

So, let’s talk about those hammers.

Section 338: Same Tariff, Different Name?

A little-known provision of the notorious Smoot-Hawley tariff bill of 1930 could provide ammunition (or, as a conceit to the opening, hammers) for the Trump Administration’s next salvo in the global trade war.

Section 338 of the Tariff Act of 1930 (19 U.S. 1338) authorizes the President to take certain trade actions upon finding that any foreign country either (1) imposes an “unreasonable” duty or other barrier on U.S. goods; or (2) uses any measure to discriminate against U.S. goods compared with goods or any other country.

The measures and process authorized by Section 338 are a trade warrior’s dream:

1. Issue a proclamation identifying the unfair trade measures.
2. If the foreign country does not relent after the proclamation, ban the import of any or all goods from that country.
3. Impose up to 50% tariffs on the goods of the foreign country.
4. Seize any goods imported into the United States in violation of Section 338.

Other than requiring the president to “find” unreasonable trade actions by the adversary, no complex legal process (such as investigation or public notice-and-comment period) is required. Also, notably, the upper “limit” of a 50% tariff would cover all of the proposed Liberation Day Reciprocal Tariffs (though not some of the increased tariffs imposed on China in the back-and-forth that followed in the month after Liberation Day).

So yeah, nothing prohibits the President from shooting first and aiming later in the next round of tariffs, which is exactly what the courts found objectionable in President Trump’s last round of global tariffs. Two different U.S. federal courts found those tariffs as imposed under IEEPA unlawful. The U.S. Court of International Trade (CIT), for example, stated that it cannot read IEEPA as “authorizing the President to impose whatever tariff rates he deems desirable.” So while the IEEPA tariff cases are pending in the federal appeals courts, new tariffs under Section 338 could be imposed on any country, in any amount up to 50%.

Notably, the IEEPA tariffs were imposed using the rationale of “unfair trade” using terms similar to the legal basis provided in Section 338. For example, the President’s IEEPA tariff Executive Order 14257 complains of “unfair trade practices by other countries,” “discriminatory licensing requirements or regulatory standards,” and “discrimination in favor of domestic state-owned enterprises.” All those complaints faintly echo the language of Section 338, which is framed to address “any unreasonable charge, exaction, regulation, or limitation which is not equally enforced upon the like articles of every foreign country,” and any foreign action which “discriminates . . . in such manner as to place the commerce of the United States at a disadvantage compared with the commerce of any foreign country.”

So why did President Trump cite IEEPA instead of Section 338 to justify his first global tariffs? We may never know. But an Amicus Curiae brief filed in the President’s appeal of the CIT case says it doesn’t matter. Now before the Court of Appeals for the Federal Circuit (CAFC), Amicus The America First Policy Institute (which is led by former Trump officials including Larry Kudlow and Robert Lighthizer) posits that the reasoning for the IEEPA tariffs fits Section 338 “like a glove.” The brief concedes that it is “understandable” that the CIT did not address Section 338 below because, well, “the President did not cite that statute in the pertinent Executive Orders.” No matter, they say. The CAFC can authorize the IEEPA tariffs retroactively under Section 338 because, they say, it “is well established that an Executive Order may be upheld under a statute not cited in the Order itself.”

Okay. Whether you’re buying that argument or not (more importantly, if the CAFC isn’t buying it), our takeaway is that there is absolutely nothing preventing President Trump from reimposing the entire range of global tariffs under Section 338 instead of IEEPA. And he can do so virtually immediately. Consequently, we are advising our clients to get used to high tariff rates, and to expect anti-tariff litigation to be an uphill battle. We’ll keep you posted here.

Section 122: A Fast (but limited) Blast from the Past

What if the President had a secret tariff machine stashed in the garage, untouched since the disco era?[6] Well, Section 122 of the Trade Act of 1974 (19 U.S.C. § 2132) grants the President emergency power to address large-scale balance-of-payments imbalances. As noted above, while the IEEPA tariffs were on-their-face imposed for discriminatory trade practice, the reality is that the “Liberation Day” tariff numbers were actually just trade balance ratios for goods. With the IEEPA-based tariff regime being challenged, Section 122 may be the next hammer the President reaches for (back through time) to address a trade imbalance.

Dusting it off and trying it out

Section 122 is a dormant authority from 1974 that has never actually been used, but it was called out by the CIT as a potential legal alternative when striking down the IEEPA-based tariffs. Section 122allows the President to impose quotas and tariffs of up to 15% ad valorem for up to 150 days when the President declares an emergency pertaining to the country’s balance of payments. Those tariff can apply to one or more countries with large balance-of-payment surpluses with the United States but, unlike the IEEPA-based tariffs, the duration of the tariff imposition is statutorily limited to 150 days unless extended by Congress.[7]

In plainer English: 15% tariffs, 5 months max, unless Congress says “keep the party going!”

In order to impose Section 122, the President must do the following:

1. The President must declare an emergency related to the balance of payments. For instance, if the U.S. trade deficit or foreign debt is deemed “large and serious” (language from the legislative history), a proclamation could announce a duty on all imports (or on imports from particular surplus countries) at 10–15%.
2. The President specifies the tariff surcharge (up to 15%) and the targeted imports. Those imports could be all imports or imports from specific countries contributing to the imbalance.
3. No investigation, ITC report, or hearing is required by the statute. The minimum legal threshold is the President’s finding of the circumstances and for these tariffs, the circumstances relate to a balance-of-payments issues, so the Section 122 hammer is tailor-made for this particular nail.

Looking Back Through Time

In 1971, President Nixon imposed a similar 10% import surcharge under the older Trading With the Enemy Act (TWEA)[8] during a payments crisis. Similar to the President’s somewhat novel use of IEEPA, Nixon used the TWEA to imposed a 10% tariff for four months to enable the U.S. to abandon the gold standard and devalue the dollar. That use of TWEA had never been done before, and Congress was less than pleased about it. Congress reacted by creating Section 122 specifically to restrict a President’s unfettered ability to use emergency powers to expand their authority.[9]

While the United States is now off the gold standard, and Section 122 has never been used, the President in 2025 could rely on this pre-delegated emergency tariff power with nothing more than a declaration and notice of tariff increases (e.g. via Federal Register). No lengthy process is required. It is an extremely fast-acting remedy with incredible breadth. Section 122 could cover all imports from all countries with a uniform surcharge (much like the Nixon and Trump across-the-board 10% surcharge), or focus on imports from countries with which the U.S. has the largest trade imbalances (for example, surcharges on goods from China, or from several top surplus nations).

Sacrificing Power for Speed

Section 122 is limited. It cannot exceed 15% ad valorem and by law is temporary (150 days). But maybe that is all Trump would need. We have seen the shock that even the short-lived IEEPA tariffs delivered to markets and trading partners. In addition to making Wall Street clench, the few days that some of the IEEPA-based tariffs were effective—and their looming shadow—has drawn trade partners to the negotiating table. It has not even been 150 days since Liberation Day, so the President could use Section 122 as a stop-gap measure while pursuing longer-term tariffs through other means or negotiations.

Further, the limits on Section 122 may be a benefit. Unlike the Reciprocal Tariffs that may not quite fit under IEEPA, the legal risk in using Section 122 is relatively low if the statute’s “check-the-box” conditions are met. Congress explicitly provided the tool, so a court challenge would likely defer to the President’s judgment on what constitutes a serious balance-of-payment issue (especially since macroeconomic emergencies are somewhat political questions). Even if the United States is not in any genuine balance-of-payment crisis, opponents might struggle to argue the President is misusing the authority before the point becomes moot in 150 days.

Internationally, Section 122 tariffs are contentious but have some justification under the General Agreement on Tariffs and Trade (GATT). GATT Article XII and Article XVIII:B allow members to impose trade restrictions for serious balance-of-payments problems. However, trading partners could challenge whether the conditions truly warrant the use of Section 122 tariffs. The U.S. would have to defend it in the WTO’s Committee on Balance of Payments Restrictions. If deemed unjustified, other countries might be authorized to retaliate or at least would exert diplomatic pressure. In summary, Section 122 carries a high WTO/legal conflict risk if used in anything but a genuine financial crisis. But as a short-term, “shock-and-awe” tariff measure, it is one of the fastest tools available.

Section 301’ing the World

Section 301 of the Trade Act of 1974 grants the President broad authority to take action—including imposing tariffs—against foreign countries that engage in unfair trade practices or violate U.S. trade agreements.

However, in order to impose Section 301 tariffs, the U.S. Trade Representative (USTR) must take the following steps:

1. Investigation: The USTR may self-initiate or an interested party may petition an investigation.
2. Consultation and Formal Dispute Settlement: If the USTR determines (this will become important later on!) that the foreign trade practice under investigation is covered by a trade agreement and efforts to resolve the dispute are unsuccessful, the USTR is required to request formal dispute settlement under the terms of that agreement—such as through the WTO process. However, if the unfair trade practice falls outside the scope of WTO rules, the USTR can take action under Section 301 without going through the trade agreement’s dispute resolution procedures.
3. Public Hearing and Request for Comments: When the USTR decides to move forward with an investigation, it must publish either a summary of the petition or an explanation for initiating the investigation on its own in the Federal Register. Additionally, within 30 days of that decision (or later if the petitioner agrees), the USTR is required to give interested parties an opportunity to express their views on the issues involved, which can include participating in a public hearing.
4. Consultation: The USTR is also required to consult with the petitioner and other appropriate private sector advisory representatives. If expeditious action is required, the USTR can seek such advice after making its determination.
5. Determination: Next, the USTR must assess whether the foreign country’s actions fall within the scope of Section 301. If so, the USTR—under the President’s direction—decides on an appropriate response, which may include imposing tariffs or other trade measures.

A Section 301 investigation may be initiated when certain conditions are met, as follows:

1. The United States’ rights under a trade agreement are being denied[10], or
2. A foreign government’s act, policy, or practice:
   • Violates, is inconsistent with, or denies benefits to the U.S. under a trade agreement[11];
   • Is “unjustifiable” and burdens or restricts U.S. commerce[12];Is “unreasonable” and burdens or restricts U.S. commerce; [13] or
   • Is “discriminatory” and burdens or restricts U.S. commerce.

The statute broadly defines “commerce” to cover not only goods, but also services (including information transfers), and U.S. investments abroad, such as foreign direct investment by U.S. persons, if those activities impact trade in goods or services.

As our clever readers[14] may surmise, the justifications for a Section 301 investigation are broad, encompassing, and subjective. They may not be flexible enough to fit every situation, but the law defines “unreasonable” as “otherwise unfair and inequitable,” which seems to be a judgment falling pretty squarely in the eyes of the beholder.

Now, those same readers may be wondering, “what about the WTO and the trade agreements. Wouldn’t the USTR need to resolve the dispute there?”

Well, the issue there is that the USTR is the entity that decides whether a certain foreign trade practice is covered by a trade agreement rule. There is no express requirement that Section 301 cases all proceed through the agreement’s dispute settlement system. The first Trump Administration and then-USTR Lighthizer made use of the absence of such a requirement—and did not go to the WTO—when the administration imposed 25% 301 tariffs on nearly all goods imported from China.

Finally, the above mentioned readers may be wondering, “are there are any statutory limits in the USTR’s actions?”

Well, the answer is, once you get through the administrative steps above, not really? The USTR’s actions pretty much go on until they are revoked. There is no sunset provision, and there aren’t any limits as to how high the tariffs can be.

So Section 301 may take more work than the other options. It lacks the quickness of a Section 332 or Section 122 imposition, but it is certainly the most powerful and may be the most difficult to challenge (challenges to Section 301 tariffs from the first administration are still grinding their way through the courts). If the White House is sufficiently determined to impose tariffs, then the front-loaded effort of the Section 301 process may be worth the longstanding impact those tariffs could have.

* * *

Thank you for joining us on this (somewhat long and winding) journey through the tariffs we may see in the coming months or years. We always welcome you to contact us but, when we write these more speculative pieces, we would be pleased to find that you want to join the conversation. Please do feel free to reach out to any of the authors with your thoughts on their work and any additions, changes, agreements, or disagreements you may have.

FOOTNOTES

[1] This is not legal advice and we do not have a crystal ball.

[2] This is also not gambling advice.

[3] Remember Liberation Day? On April 2, 2025, President Trump announced a 10% “reciprocal tariff” on imports from all countries, with heightened tariffs of between 11% and 50% on a broad range of others . Then, on April 9, 2025, after the U.S. stock market crashed and the bond market wobbled, the White House issued a 90 day pause on the tariffs, reducing nearly all of them to 10% (except China, but that is another story).

[4] Well, that speculation is beyond the scope of this blog. We certainly don’t hesitate to hash it all out over coffee.

[5] The decisions provide more detail but, essentially, hold that the state of U.S. bilateral trade deficits with every country in the world as they have existed for the past 30 years are not an emergency sufficient to serve as the basis for IEEPA actions or everything is an emergency, the “Emergency” in IEEPA is meaningless, and congress has handed over to the President its entire Article I power to lay and collect taxes, in contravention of the nondelegation doctrine.

[6] A disco tariff hammer, if you will allow us to painfully overstretch a metaphor.

[7] We note however that that is substantially longer than the three days that some of the IEEPA based tariffs were in effect before they were “paused.”

[8] Nixon’s Pres. Proclamation No. 4074 never actually mentioned TWEA. Maybe, as Congress has supposed, because he didn’t want to use a statute called “Trading with the Enemy Act” to impose tariffs on allies.

[9] The Report of the House Committee on International Relations summarized its thoughts on emergency powers in the Trading with the Enemy Act Reform Legislation, pg. 11:

[G]iven the breadth of the authorities, and their availability at the President’s discretion upon a declaration of a national emergency, their exercise should be subject to various substantive restrictions. The main one stems from a recognition that emergencies are by their nature rare and brief, and are not to be equated with normal ongoing problems. A national emergency should be declared and emergency authorities employed only with respect to a specific set of circumstances which constitute a real emergency, and for no other purpose. The emergency should be terminated in a timely manner when the factual state of emergency is over and not continued in effect for use in other circumstances. A state of national emergency should not be a normal state of affairs.

[10] 19 U.S.C. § 2411(a)(1)(A).

[11] 19 U.S.C. § 2411(a)(1)(B)(i).

[12] 19 U.S.C. § 2411(a)(1)(B)(ii).

[13] 19 U.S.C. § 2411(d)(3).

[14] Who are certainly not susceptible to flattery.