While Sections 232 and 301 of U.S. trade law deal with national security and unfair trade practices, Section 122 of the Trade Act of 1974 serves a different purpose. It grants the President authority to manage economic crises related to the nation's balance-of-payments. This isn't about protecting a specific industry like steel or punishing a country for intellectual property theft. Instead, Section 122 is a tool for macroeconomic stabilization, designed to steady the entire U.S. economy during financial emergencies.

The President can't invoke Section 122 on a whim. The law specifies clear triggers for its use. The primary conditions are a large and serious balance-of-payments deficit or an imminent and significant decline in the international value of the dollar. A third, less common trigger involves cooperating with other countries on international monetary problems.

These conditions highlight the law's focus on broad economic health. A sudden, sharp drop in the dollar's value could trigger inflation and destabilize financial markets, justifying a temporary, economy-wide intervention.

When Section 122 is used, it comes with strict limitations to prevent its misuse. Any action taken under this authority is temporary and limited in scope.

First, the President can impose a temporary import surcharge (a tariff) of no more than 15%. Second, this measure cannot last longer than 150 days unless Congress grants an extension. These guardrails ensure that the authority is used as a short-term emergency fix, not a long-term protectionist policy.

The President also has flexibility in how to apply these measures. The tariffs can be applied non-discriminatorily to all imports or selectively against certain countries. This allows for a tailored response, depending on the nature of the crisis. For example, if a currency crisis were driven by actions from a specific group of countries, the response could be targeted accordingly.

For decades, Section 122 was considered a dormant power, overshadowed by more frequently used trade statutes. However, its relevance was recently thrust back into the spotlight. In a hypothetical scenario, imagine that in February 2026, the Supreme Court strikes down the use of the International Emergency Economic Powers Act (IEEPA) for imposing broad tariffs, ruling that its authority was being overextended.

In such a situation, the administration would need a different legal foundation for emergency trade actions. Section 122, with its clear constitutional standing and specific triggers, would become a viable, if more constrained, alternative. This revitalization would transform it from a historical footnote into a critical fallback mechanism for a President navigating a sudden economic crisis.

While its strict limits make it less powerful than IEEPA, Section 122's specific focus on balance-of-payments and currency crises gives it a solid legal footing for its intended purpose: short-term, decisive action to protect the stability of the U.S. economy.