President Donald Trump’s sweeping “Liberation Day” tariffs were barely cold after the Supreme Court struck them down as illegal on Friday before he announced their replacement. At a press conference just hours after the ruling, he declared a 10% global tariff – bumped up to 15% a day later – under a different law.

But Trump’s new blanket tariff, based on never-before-used powers given to the president by a 1974 law, is potentially just as illegal as his old ones, and is virtually certain to be subject to new lawsuits. Skepticism about his power under the law hasn’t just come from critics, but from his own Justice Department.

“It is very likely that challenges will be filed against the Section 122 tariffs,” said Ilya Somin, a law professor at George Mason University who represented the plaintiffs in the case in which the Supreme Court struck down Trump’s emergency tariffs.

Trump is relying on Section 122 of the Trade Act of 1974, which gives the president the power to implement tariffs to address “fundamental international payments problems” that appear as “large and serious United States balance-of-payments deficits,” “imminent and significant depreciation of the dollar in foreign exchange markets,” or “an international balance-of-payments disequilibrium.”

No president had ever used this authority before Friday.

The problem? While the United States does have a trade deficit – we import more goods than we export – many experts say that we don’t have a balance-of-payments deficit, which goes beyond imports and exports to include all monetary transactions between nations, like dollars held by foreign countries, the financing of debt and foreign investment. The dollar remains the world’s reserve currency, U.S. debt is still being financed and foreign investment continues to flow into the country.

The Trump administration, however, said when the president announced the Section 122 tariffs that there were actually “fundamental international payment problems, in particular a large and serious balance-of-payments deficit,” and attempted to argue that a trade deficit inherently meant the country had a balance-of-payments problem, too.

But conservative economists, like Milton Friedman, have long argued that a balance-of-payments problem simply isn’t possible when the currency has a floating exchange rate.

“There is no balance-of-payments crisis going on right now and simply cannot be so long as we have flexible exchange rates,” Somin said.

It’s not just critics who have argued that Trump’s invocation of Section 122 is illegal, but the Trump administration itself. Back when the legal challenge that ultimately overturned Trump’s emergency tariffs was before an appellate court, the Department of Justice argued that Section 122 could not be used in place of the emergency tariffs the Supreme Court overturned because trade deficits and balance-of-payments were not the same thing.

“Nor does [Section 122] have any obvious application here, where the concerns the President identified in declaring an emergency arise from trade deficits, which are conceptually distinct from balance-of-payments deficits,” the DOJ brief, filed in 2025, states, citing the original Senate report on the law.

That may not directly affect any future argument the administration makes in a forthcoming court case, although it “reduces the credibility of the assertions they make now,” Somin said.

The context in which the law became reality adds to the confusion. In 1971, President Richard Nixon imposed 10% emergency tariffs in response to a balance-of-payments crisis that emerged from the dollar’s peg to gold as part of the Bretton Woods monetary system. The country faced a shortfall of gold reserves needed to back the increasing amount of dollars held overseas, which contributed to the overvaluation of the dollar. In response, Nixon moved the dollar off its fixed peg to gold and imposed a tariff to prevent a flood of imports and as a stick to pressure countries to revalue their currencies.

Congress enacted the Trade Act to give the president leeway to deal with a similar situation should it arise in the future. But, according to many observers, that is not what is happening now.

“The US does not have a fundamental international payments problem,” former International Monetary Fund chief economist Gina Gopinath wrote on social media on Sunday, adding, “As long as there is plenty of demand for US debt and equities, which is the case, the US does not have a ‘payments’ problem. It can finance its trade deficits easily. A signal of a payments problem would be if US borrowing costs rose dramatically.”

Other experts point out that it doesn’t make much sense for Congress to enact a law that only applies to fixed-rate currencies after the U.S. moved to a floating exchange rate.

“I don’t know if you’re going to have five or six votes on the Supreme Court for the idea that Congress in 1974 enacted a null statute,” said Todd Tucker, director of industrial policy and trade at The Roosevelt Institute, a progressive think tank.

Others insist the trade deficit does play a role. Council on Foreign Relations senior fellow Brian Setser argued on X that “there is a reasonable case the US does have a ‘large and serious … balance of-payments deficit,’” as measured by its trade deficit and other international financial deficits. Sester isn’t the only one who has made this argument.

The court that hears tariff policy cases may be more inclined to agree that Trump can use it to address trade deficits. In the Court of International Trade decision that initially went against Trump’s emergency tariffs, the decision specifically stated that other authorities, including Section 122, existed as an argument against the ability of the president to invoke an emergency to apply tariffs as Trump did. That decision also mentioned that Section 122 could be used to address trade deficits.

“The President’s imposition of the Worldwide and Retaliatory Tariffs responds to an imbalance in trade—a type of balance-of-payments deficit—and thus falls under the narrower, non-emergency authorities in Section 122,” the decision stated.

It is also possible that the Supreme Court may not want to get into the weeds of economic definitions.

“There is not a lot of appetite – I don’t think – to be getting into these subtle macroeconomic questions,” Tucker said.

Whether these issues ever get sorted out by the courts is another question. Section 122 tariffs can only be imposed for 150 days absent a further extension by Congress. And there is no way that the courts will meaningfully come to a final determination by then.