US Temporary Tariff Under Article 122: Strategies for Controlling International Payment Instruments

On February 22, the United States implemented a series of new tariffs referencing Section 122 of the Trade Act of 1974—a rarely used legal provision in recent decades. This move marks a significant escalation in the U.S. strategy to control international payment tools and improve its trade position on the global stage. By activating this rare clause, Washington affirms its commitment to intervening in the international balance of payments, which has shown persistent deficits.

The Importance of Section 122 in Balance of Payments Regulation

Section 122 technically allows the U.S. government to address “fundamental issues in the overall balance of payments,” not just trade deficits in goods. This comprehensive assessment includes various components: inflows and outflows of capital, trade in goods, and international exchange of services. In other words, this effort focuses on holistic management of international payment tools beyond mere trade exchanges. Given the broad scope of Section 122, its application has the potential to face legal challenges, as seen in the past.

Trade Deficit and Control of International Payment Tools

The substantial U.S. trade deficit is a primary driver of this policy. However, by referencing Section 122, the government aims to go beyond a simple narrative of “cheap goods from abroad.” This strategy is more ambitious—recalibrating the entire international payment ecosystem through systematic tariff interventions. Such steps signal Washington’s determination to manage not only physical trade flows but also broader dynamics of capital and exchange rates.

China’s Response to U.S. Tariff Escalation

International trade expert Cui Fan provides valuable analysis on potential future developments. If the U.S. chooses to limit or halt the implementation of these new tariffs, China is likely to conduct a thorough review and adjust its response strategy proportionally. Conversely, if Washington continues to activate trade law tools to enforce additional tariffs, Beijing will carefully consider whether to take balanced retaliatory actions. This dynamic indicates that both sides are closely monitoring each move, prepared to respond within the complex and sensitive framework of international payment tools negotiations.