TARIFFSThe Trump Administration’s WTO Filing Exposes the Bad Faith Behind Its Section 122 Tariffs
On June 2, the Trump administration submitted a document to the World Trade supposedly justifying its Section 122 tariffs. The filing is revealing—not for what it gets right but for what it exposes about the administration’s bad faith legal theory. The administration desperately wants courts and trading partners to believe it is acting within the rules, but its bad faith filing at the WTO demonstrates otherwise.
On June 2, the Trump administration submitted a document to the World Trade Organization’s (WTO) Balance-of-Payments Committee supposedly justifying its Section 122 tariffs. The filing is revealing—not for what it gets right but for what it exposes about the administration’s bad faith legal theory. To establish that the United States is experiencing a “large and serious” balance-of-payments (BoP) deficit—as Section 122 requires and Article XII of the General Agreement on Tariffs and Trade (GATT) permits—the administration points to the current account deficit, driven by the trade deficit, as the “most appropriate measure” of a BoP deficit. The argument does not just strain the domestic statute, but it also flatly contradicts how a BoP deficit has been defined in international trade law for decades. By openly and deliberately flouting the GATT, the administration is also exposing its use of Section 122 in a way that undermines the congressional intent when the provision passed—and the larger statute it is a part of.
The Trade Act of 1974 was broad legislation. It granted the president negotiating authority to tackle tariff barriers with other contracting parties to the GATT, which the US subsequently used to negotiate and complete the Tokyo Round of Multilateral Trade Negotiations. The act also handed the executive branch significant new tools to restrict imports unilaterally, including Sections 122, 201, and 301. Critically, Congress enacted this legislation with full awareness of the GATT’s framework, including how the agreement defines a BoP crisis. That definition is unambiguous: GATT Article XII permits contracting parties (now WTO member states) to impose trade restrictions only to (a) “forestall the imminent threat of, or to stop, a serious decline in [a member state’s] monetary reserves” or (b) “achieve a reasonable rate of increase in its reserves,” in case they are “very low.” In other words, a BoP crisis under the GATT—and therefore under Section 122 of the Trade Act of 1974—is about monetary reserves, not trade and current account deficits. The GATT thus codifies, even more explicitly than Section 122 itself, the Bretton Woods–era understanding of what a BoP deficit meant.
