Retaliatory tariffs on shortages: the US relies on a rarely used trade law

In early February, the United States announced the implementation of new restrictive tariffs, citing provisions of Section 122 of the Trade Act of 1974. This rarely used regulation in modern practice has become a tool to address significant imbalances in international trade and finance. The strategic goal is to resolve the deep-rooted issue of the balance of payments, which encompasses both trade flows and capital flows.

Legal Basis and Potential Disputes

A key feature of Section 122 is that its application requires documentary evidence of a fundamental problem in the overall balance of payments, not just in trade in goods alone. This comprehensive assessment includes analysis of service trade, investment flows, and other economic factors. Based on this, the new American tariffs may be vulnerable to legal challenges, as evidenced by precedents from previous years.

Expert in international trade relations Cui Fan noted the critical role of possible actions by all parties in developing the situation. In his view, if the U.S. abandons the new tariffs or significantly reduces them, China may reassess its countermeasures and adjust accordingly. However, if the U.S. continues to impose new restrictions through other legislative tools, China will consider implementing appropriate protective measures in response.