Reasons why the U.S. reinstated Section 122 of the Trade Act of 1974: The beginning of a new tariff strategy

DAOTruant · 2026-02-28T08:10:29+00:00

On February 22, the U.S. revived Section 122 of the 1974 Trade Act to impose temporary tariffs, marking a significant shift in trade strategy amidst ongoing trade deficits. This move points to deeper structural issues and potential long-term trade tensions, particularly with China.

DAOTruant

2026-02-28 08:10:29

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On February 22, the United States announced the formal implementation of a new temporary tariff, invoking Section 122 of the Trade Act of 1974, which had not been used for nearly 40 years. This move is not just a policy adjustment but a significant turning point in U.S. trade strategy.

Why has an old law been revived now?

Section 122 of the 1974 Trade Act was designed as an emergency measure to address the U.S. balance of payments crisis. The reason it is drawing renewed attention is due to the structural trade deficit facing the U.S. These circumstances could no longer be effectively managed with traditional tariff policies, prompting the reactivation of this “dormant weapon” with a stronger legal basis.

The fundamental issue of the balance of payments deficit

Applying Section 122 requires more than just a trade deficit; it involves addressing the broader issues of the overall balance of payments. This includes not only trade in goods and services but also complex factors like capital inflows. By leveraging this broad interpretation, the U.S. has gained grounds to impose tariffs on more industries.

Legal risks and past precedents

Historically, using this provision for tariffs has faced legal challenges. There are potential conflicts with World Trade Organization (WTO) rules and other trade agreements. However, the U.S. has proceeded with this action, prioritizing domestic law despite these legal risks.

How will China respond?

According to analysis by trade expert Cui Fan, China’s future response could follow multiple scenarios. If the U.S. withdraws these tariffs or lowers the tariff rates, China may respond flexibly and adjust its approach. However, if the U.S. continues to impose new tariffs through various legal means, China is likely to seriously consider retaliatory measures.

Does this mean a prolonged trade war?

The U.S. move suggests a new pressure strategy beyond existing rules frameworks. The use of the old law, Section 122 of the 1974 Trade Act, signals the U.S.'s firm stance. How China reacts will significantly influence the future of U.S.-China trade negotiations.

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