Democratic Attorneys General Mount Legal Challenge to Trump’s Section 122 Tariffs

22 Attorneys General Cite Milton Friedman in Challenge to Trump’s Section 122 Tariffs

• Democrats invoke free‑market sage Milton Friedman in a federal lawsuit.
• Section 122 permits tariffs up to 15% for 150 days.
• Trump claims the tariffs will shrink a $1.2 trillion goods trade deficit.
• Legal scholars warn the move may breach the Constitution’s Commerce Clause.

Why a free‑market economist is being weaponized in a partisan legal fight

SECTION 122 TARIFFS—The filing on Thursday marks the first coordinated effort by state attorneys general to contest a presidential tariff authority that has lain dormant since the early 1980s. By invoking Milton Friedman, the plaintiffs hope to frame the dispute as a pure market‑efficiency question rather than a partisan showdown.

President Donald Trump activated Section 122 last month after the Supreme Court nullified his emergency tariffs on Chinese steel. The statute, originally crafted in 1974, allows the executive to levy duties of up to 15 percent for up to 150 days when a “large and serious balance‑of‑payments deficit” exists.

Trump’s administration argues that the United States faces a $1.2 trillion trade deficit in goods—a figure the Treasury Department reiterated in a February briefing. Critics, however, point to IMF data suggesting the deficit’s impact on domestic employment is marginal.

Why Section 122 Tariffs Face a Constitutional Test

Legal foundations and the Commerce Clause

Section 122 is embedded in the Trade Act of 1974, a post‑Nixon era statute designed to give the President a rapid response tool for balance‑of‑payments crises. The law’s language—”large and serious” deficits—has never been precisely defined, leaving room for judicial interpretation. Constitutional scholars, such as Professor Laurence Tribe of Harvard Law School, argue that the statute may overstep the Commerce Clause because it targets imports based on a macro‑economic metric rather than a direct threat to interstate commerce. Tribe told the New York Times in January 2024 that “Congress granted a narrow, emergency‑only power; extending it to a broad, ongoing trade policy risks invalidation.”

In the current suit, the 22 Democratic attorneys general allege that the administration failed to demonstrate the requisite deficit magnitude. The Treasury’s own data for fiscal year 2023 shows a $1.2 trillion goods deficit, but the International Monetary Fund’s April 2024 World Economic Outlook estimates the underlying structural deficit at roughly $0.9 trillion, a 25 percent gap that, according to IMF senior economist Anne Krueger, “does not rise to the level of a crisis.” The plaintiffs contend that without a clear, quantifiable crisis, the statutory trigger is unmet.

Beyond the Commerce Clause, the lawsuit raises the Administrative Procedure Act (APA) issue of “arbitrary and capricious” action. The APA requires agencies to provide a reasoned explanation for regulatory choices. The White House Office of Trade, in a March 2024 briefing, offered only a brief statement that “the tariffs are essential to protect American jobs.” Legal analyst Susan K. Liao of the Center for Regulatory Reform warned that such a thin justification could be deemed insufficient under APA standards, a view echoed in a recent Federal Register notice (Vol. 89, No. 45).

Economic impact studies further complicate the picture. Douglas Irwin, a Harvard economist, told Bloomberg in March 2023 that “historically, ad‑hoc tariffs have produced negligible reductions in trade deficits while inflating consumer prices.” Irwin’s analysis of the 2018 steel tariffs—another high‑profile use of Section 122—found a 0.3 percent drop in the overall deficit, a change far smaller than the administration’s projected 2‑percent impact.

These legal and economic arguments suggest the case will hinge on whether the courts view Section 122 as a narrowly tailored emergency measure or as a blunt instrument that violates constitutional commerce principles. The next phase of litigation, slated for June 2024, will likely feature expert testimony on both the statutory language and the macro‑economic data, setting the stage for a decision that could reshape presidential trade powers. The outcome will also inform whether future administrations can rely on Section 122 to sidestep congressional appropriations.

Stat Card – Record‑High Tariff Rate Under Section 122

Understanding the statutory ceiling

When President Trump invoked Section 122 in January 2024, the administration announced a 15 percent tariff on imported steel and aluminum—exactly the maximum allowed by law. The 15 percent figure is not an arbitrary policy choice; it is codified in 19 U.S.C. § 1221, which caps duties at that level for a period not exceeding 150 days. The statute was originally intended as a short‑term shock absorber during the 1970s oil crises, not as a permanent trade‑policy lever.

Historically, the highest tariff ever imposed under Section 122 was 12 percent on Japanese autos in 1979, a measure that lasted only 90 days before Congress repealed it. By contrast, the current 15 percent rate represents a 25 percent increase over that precedent, signaling an unprecedented escalation in presidential tariff authority.

Economists warn that such a high rate can trigger retaliatory measures. In a June 2023 briefing, the Office of the United States Trade Representative (USTR) projected that a 15 percent duty on steel could invite counter‑tariffs amounting to $3.4 billion in lost export revenue for U.S. manufacturers, according to a risk‑assessment model developed by the International Trade Administration.

The financial markets responded swiftly. The Bloomberg Commodity Index for steel fell by 4.2 percent on the day the tariffs were announced, while the price of aluminum rose 3.1 percent, reflecting supply‑side concerns. These price movements underscore the immediate economic ripple effects of hitting the statutory ceiling.

Looking ahead, the 150‑day limit means the tariffs could expire by late June 2024 unless Congress authorizes an extension. The statutory deadline will become a focal point for both lawmakers and industry groups lobbying for relief, and it will likely shape the arguments presented at the upcoming federal hearing on July 15.

Bar Chart – Historical Use of Section 122 vs. Other Trade Tools

Comparing Section 122 to Section 301 and Section 232

Since its enactment in 1974, Section 122 has been invoked only three times prior to the 2024 Trump administration: 1979 (Japanese autos), 1991 (Kuwaiti oil imports), and 2002 (post‑9/11 security measures). By contrast, Section 301—used for “unfair trade practices”—has generated over 150 investigations since 2018, while Section 232, the national‑security tariff authority, has produced 12 major duties since 2018. Data from the U.S. International Trade Commission (USITC) shows that in fiscal year 2023, Section 122 accounted for 0.3 percent of total tariff actions, whereas Section 301 comprised 45 percent and Section 232 5 percent.

These figures illustrate why the current invocation of Section 122 is striking: it breaks a decades‑long pattern of restraint. Trade policy analyst Michael Froman, former U.S. Trade Representative, told Reuters in February 2024 that “the Trump administration is reaching for the most aggressive tool in the trade‑law toolbox, one that has rarely been tested in modern commerce.” Froman’s comment reflects a broader concern that the administration may be bypassing the more transparent, congressionally overseen mechanisms of Section 301.

The bar chart below visualizes the relative frequency of each statutory tool over the past ten years, highlighting the outlier status of the 2024 Section 122 activation. The chart underscores the strategic shift toward a high‑impact, low‑frequency instrument that can generate immediate headline‑making tariffs but also invites legal scrutiny.

Industry groups such as the American Iron and Steel Institute (AISI) have warned that the unprecedented use of Section 122 could destabilize supply chains that have adapted to the more predictable Section 301 framework. AISI’s CEO, John Smith, testified before the Senate Finance Committee in March 2024 that “companies need certainty; a sudden 15 percent duty under a rarely used statute creates a shock that reverberates through pricing, inventory, and long‑term contracts.”

Future trade negotiations will likely reference this divergence, with European and Asian partners citing the 2024 Section 122 case as evidence of an “unpredictable U.S. tariff regime.” The bar chart therefore not only records past usage but also foreshadows diplomatic friction that could arise if the administration continues to favor Section 122 over more collaborative tools.

Do the Numbers Justify the Tariffs? A Comparative Analysis

Projected savings versus independent estimates

The Trump administration’s public justification for the Section 122 tariffs hinges on a $1.2 trillion goods trade deficit, a figure released by the Treasury in February 2024. Officials claim that a 15 percent duty on steel and aluminum imports will cut the deficit by roughly 2 percent, translating into a $24 billion improvement over the next fiscal year.

Independent analysts, however, present a more modest outlook. The International Monetary Fund’s April 2024 World Economic Outlook estimates that the structural trade deficit is closer to $0.9 trillion, and that tariff‑induced price increases would likely offset any reduction in import volume. IMF senior economist Anne Krueger calculated that even a full‑scale 15 percent tariff would shave only $12 billion off the deficit, half of the administration’s claim.

A comparison chart below juxtaposes the administration’s projected deficit reduction with the IMF’s independent estimate. The visual gap underscores the contested nature of the economic rationale and raises questions about the cost‑benefit balance of imposing steep duties.

Beyond macro‑deficit numbers, sector‑specific data reveal additional consequences. The Steel Manufacturers Association reported that U.S. steel producers forecast a 5 percent drop in domestic demand due to higher downstream costs, potentially leading to a loss of 8,000 jobs in the next 12 months. Conversely, the American Iron and Steel Institute projected a short‑term profit boost of $1.3 billion for domestic producers, illustrating the uneven distribution of gains and losses.

These divergent projections suggest that the legal challenge will likely focus on whether the administration’s numbers were “substantially supported” by evidence, a standard under the APA. If the court finds the projections speculative, it may deem the tariffs arbitrary and capricious, paving the way for a preliminary injunction. The comparative analysis thus sets the stage for a data‑driven showdown in the courtroom.

Timeline – Key Milestones in the Section 122 Tariff Saga

Chronology of legal and policy events

The Section 122 story in 2024 began on September 30, 2023, when the Supreme Court unanimously struck down President Trump’s emergency tariffs on Chinese steel, citing procedural deficiencies. In the wake of that decision, the White House turned to Section 122 as an alternative legal pathway. On January 15, 2024, the Office of the President announced the activation of Section 122, imposing a 15 percent duty on imported steel and aluminum.

Four days later, on January 19, 2024, the Treasury released a briefing paper outlining the $1.2 trillion trade deficit figure and the expected economic impact of the tariffs. The paper cited data from the Bureau of Economic Analysis and projected a 2 percent reduction in the deficit.

On February 20, 2024, a coalition of 22 Democratic attorneys general filed a lawsuit in the U.S. District Court for the District of Columbia, invoking Milton Friedman’s free‑market principles to argue that the tariffs are both illegal and economically inefficient. The complaint was signed by Attorneys General Letitia James (New York) and Maura Healey (Massachusetts), among others.

The case moved to a hearing before Judge James Ho on March 10, 2024, where both sides presented expert testimony. Economist Douglas Irwin testified that historical data show “minimal impact on trade balances from ad‑hoc tariffs,” while USTR official Katherine Tai emphasized the administration’s national‑security rationale.

The timeline culminates with a scheduled briefing on July 15, 2024, where the court will consider a preliminary injunction request. The outcome will determine whether the 150‑day tariff window closes as scheduled or is extended by congressional action. This sequence of events illustrates how a rarely used statutory tool has become the fulcrum of a high‑stakes legal and economic battle.