Leibowitz: Tariffs, war, and the blurry limits of presidential power

Tariff-related litigation in the US and around the world reflects the willingness of the president to act without consulting Congress or our trading partners.

We’re seeing the impulse to act without congressional approval in international relations too. The latest example: the US and Israeli attacks this weekend on Iran and its leadership. The “supreme leader” will not be missed. But the Middle East is now burning. And how the situation ends is anyone’s guess.

A 101 on Section 122

Let’s go in chronological order. On Feb. 20, the Supreme Court struck down the IEEPA tariffs because Congress did not allow the president to set tariffs under the relevant statute. Later that day, Trump announced new tariffs, this time under Section 122 of the Trade Act of 1974.

That statute permits the president to impose an “import surcharge” of not more than 15% for a period of not more than 150 days to respond to a “large and serious” balance of payments deficit in the United States.

The issue surrounding the certain litigation over Section 122 tariffs is whether the requirement for acting (a “large and serious” balance of payments deficit) exists. The president will try to replace “balance of payments” with another standard more to his liking, such as a “current account” deficit.

Because the world has had floating exchange rates for more than half a century, the requirement in Section 122 is basically a dead letter. Why? Because balance of payments deficits don’t happen. Exchange rates float, and no currency is tied to gold anymore.

The amount of money flowing into the US each day (including foreign investments) is equivalent to the amount flowing out. The world recognizes the dollar as a primary reserve currency because the world expects the US to keep its promise that the dollar will be a reliable measure of value.

In 1974, it wasn’t certain this promise would hold. But it has held. And the world is much better off for it. Section 122 does not support the president’s tariffs, its challengers will argue, because there is no balance of payments problem to face.

Expect legal challenges to 122, but no quick decisions

A legal challenge to the Section 122 tariffs will likely turn on this distinction: Does the statute require a “large and serious” balance of payments deficit as traditionally understood? Or do the words used in 1974 mean something different now than they did then? If the original meaning is the test, the balance of payments deficit in 2026 is neither “large” nor “serious”.

There is no doubt in my mind that there will be lawsuits over this. Courts will need to answer that question. And, because the majority of the Supreme Court Justices are now “originalists,” it is likely that the Court will find against the president’s new tariffs.

Because the wheels of justice grind slowly, the 150-day time limit for the Section 122 tariffs will likely come and go before a final decision is reached, even by the Court of International Trade (CIT), the first stop for this type of litigation. The likelihood of a preliminary injunction is small because of the high standards for preliminary relief in tariff and taxation cases (having to pay money is rarely considered “irreparable injury”).

The Supreme Court will probably get the Section 122 case sometime next year or in 2028. Thousands of cases will eventually be filed to recover refunds of the unlawful tariffs, assuming the Section 122 tariffs are found to be unlawful. This is hardly a perfect way to run a country. But there it is.

The CIT will have had a lot of practice by then in administering refunds. Thank the avalanche of refund cases already piling up in court because of the IEEPA tariffs case for that. I hope the Court will develop a system that makes refunds simpler and quicker than filing federal litigation. More will be said about that in the very near future.

Whether it’s tariffs or war, where is Congress?

The president’s action in waging war against Iran is the latest example of arguably unconstitutional action without consultation with, let alone approval by, Congress. The attacks on Iran this weekend were clearly done with prior consultations—with Israel, the UAE, and other countries—but not with Congress.

The result: War-making joins the tariff decisions as examples of presidential actions that essentially ignore the notion of separation of powers. Maybe it’s time to revitalize the concept.

Congress bears its share of the blame for its own irrelevancy. They must act rather than resist by complaining. The president’s willingness to act alone on major issues certainly did not originate with him. (See student-loan forgiveness, environmental regulation, etc., under prior administrations.) But you could make the case that it has reached a new level now.

How quickly might presidential power continue to grow, and how can Congress act to slow it down? These are key questions to ask no matter whether your focus is geopolitics and trade policy or supply chains and commodity prices.