In his latest bid to salvage his protectionist trade agenda, President Donald Trump imposed a new 10% tariff on all imports to the United States. To justify this move, Trump cited the existence of a trade deficit and invoked an obscure clause of the Trade Act of 1974, called Section 122. This clause allows the president to impose tariffs for up to 150 days; however, its provisions only apply in the presence of a “large and serious United States balance-of-payments deficits.”
Trump’s use of Section 122 is illegal because the United States does not currently have a balance-of-payments deficit. This term referred to a drawdown on official gold and other currency reserves of the United States under the old Bretton Woods currency peg system, which was abandoned in the early 1970s and officially terminated in 1976. Under the current floating exchange rate regime, the U.S. balance of payments is officially zero. Trump errs in trying to change the definition of “balance-of-payments deficit” to mean a common trade deficit, or the situation where the United States imports more goods and services than it exports. Yet as Marc Wheat and I show in a recent article for National Review, this was not Congress’s intention when it passed the Trade Act of 1974.
Trump’s novel reinterpretation of Section 122 faces another problem. He is the first president to attempt to use this clause for a reason. Previous administrations have examined its text in detail and come to the conclusion that Section 122 simply does not apply to common trade deficits.
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Trump’s interpretation of Section 122 s not only a misreading of its terminology—it’s a misreading that past administrations investigated in response to similar trade deficit conditions. As [Martin] Feldstein’s testimony shows, the Reagan Administration explicitly rejected Trump’s current argument and found that a “balance-of-payments deficit” did not exist under the current floating exchange rate system.
In a report by the Fraser Institute (“US Economic Freedom in a Trade War”), Robert Lawson and Matthew Mitchell highlight a slew of unquestionable facts. It is revealing, and sad, that every country “singled out for treating” the US unfairly is, incredibly, more open to trade than the US itself. The effective tariff rate, at one point since the onset of the new trade war, was as high as 28%, comparable to Sudan or Djibouti. While the sting in prices and lower growth has yet to be fully felt across US consumers and producers, the fact remains that income per capita in the 15 countries with the lowest effective tariffs is 4.5 times greater than in the 15 countries with the highest tariffs. The complex gamut of reciprocal tariffs has knocked the US from 56th to 76th place in the world “in terms of freedom to trade,” and out of the top ten in overall economic freedom.
Let us be clear: the economic arguments for tariff walls and protectionism are nothing more than a version of neo-mercantilism, where one nation’s benefit entails another nation’s loss. This is the conviction behind Trump’s oft-cited claim that “we are getting ripped off” and his obsession with the word tariff. But members of his economic team (with the salient exception of Peter Navarro, the worst trade economist “in history”) should know better: wealth creation is based on open competition, innovation, and consumer sovereignty. Tariffs, whether 1% or 100%, constitute new taxes that arbitrarily distort prices, disrupt market signals, and expropriate hard-won earnings from people who simply want to get ahead via open commerce.
The main economic argument in favor of tariffs is the disequilibrium in the balance of trade. The great enemy is, supposedly, the trade deficit. If the US buys more from abroad than it sells outside its borders, then the sellers are literally “stealing” from the buyers. But how can balancing the amount sold with the amount bought lead to fairness, or “reparation” of jobs lost? The balance of trade is not a corporate balance sheet—unless one interprets wealth as a fixed quantity of goods in a zero-sum world.
The Jones Act is officially so Bad that the only people the lobbyists can find publicly defending the law are internet commenters lol
Jim Geraghty reports that the U.S. economy is now in the doldrums. Two slices:
Friday’s job numbers brought evidence suggesting that the gloomy types accurately saw weakness in the economy that the official numbers obscured. The latest release from the U.S. Bureau of Labor Statistics showed a loss of 92,000 jobs in February, with downward revisions for the two months before that. Employers added just 181,000 jobs in 2025, around 70 percent fewer than BLS’s initial estimate of 584,000, and the revised numbers are getting worse, not better. Hiring Lab, the economic research arm of the jobs site Indeed, has concluded that “the labor market has averaged essentially zero net job creation over the past six months.”
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If companies are growing increasingly risk averse in Trump’s second term, part of the reason is a spectacularly erratic president who has become a one-man force for economic unpredictability and instability. Trump started his second term by launching a trade war against the whole world, subsequently lost a Supreme Court decision on tariffs, threw a public tantrum claiming the court had been “swayed by foreign interests,” and then turned around and imposed new tariffs to replace the old ones under a new justification.
Trump loves intervening in markets as much as his new best buddy, New York Mayor Zohran Mamdani, and at any given moment, any company can find itself denounced on Truth Social as being run by “Leftwing nut jobs.” One day the artificial intelligence company Anthropic has a $200 million contract with the Pentagon; the next, Trump orders “EVERY Federal Agency in the United States Government to IMMEDIATELY CEASE all use of Anthropic’s technology.”
The Supreme Court held in Jarkesy (2024) that agencies must bring claims rooted in common law and involving “private rights” in Article III courts where defendants are entitled to a trial by jury. The Rosses say that breach of guest workers’ contracts—which DOL is seeking to enforce with penalties—is a common law claim that belongs in federal court.
Chief Justice John Roberts stressed in the Jarkesy majority opinion that government penalties “designed to punish or deter the wrongdoer” are a “prototypical common law remedy.” While the Court didn’t draw a bright line between public and private rights, the Chief noted “even with respect to matters that arguably fall within the scope of the ‘public rights’ doctrine, the presumption is in favor of Article III courts.”
A DOL in-house judge disagreed. The judge held that the Court’s Jarkesy ruling doesn’t apply to the Rosses even though the Third Circuit Court of Appeals last summer invalidated DOL’s use of in-house agency courts in an H-2A case involving a New Jersey vegetable farm. The DOL judge said that ruling doesn’t apply in other judicial circuits.
The Institute for Justice says other federal agencies have also tried to cabin Jarkesy’s holdings. Advocates of administrative tribunals claim they’re more efficient than federal courts, but the Ross case belies this conceit. Their formal administrative hearing is scheduled for September, nearly five years after their DOL audit.
If agencies had to bring cases in federal court, they might be more judicious about which they pursue and less likely to harass innocent businesses. Permitting “Congress to concentrate the roles of prosecutor, judge, and jury in the hands of the Executive Branch,” as the Chief noted in Jarkesy, “is the very opposite of the separation of powers that the Constitution demands.”
Chelsea Follett takes us on a tour of pre-industrial New York City. A slice:
As late as the mid-nineteenth century, pigs roamed freely through New York City streets, acting as scavengers, and nearly every household maintained a vegetable garden, often fertilized with animal manure.
Indoor air quality was no better. A drawing from Mary L. Booth’s History of the City of New York depicts a seventeenth-century New Amsterdam home with smoke from the fireplace swirling through the room. Indoor air pollution remains a serious problem today in the poorest parts of the world, as smoke from hearths can cause cancer and acute respiratory infections that often prove deadly in children. One preindustrial writer railed against the “pernicious smoke [from fireplaces] superinducing a sooty Crust or furr upon all that it lights, spoyling the moveables, tarnishing the Plate, Gildings and Furniture, and Corroding the very Iron-bars and hardest stone with those piercing and acrimonious Spirits which accompany its Sulphur.”
That said, before industrialization, though inescapable filth coated the interiors of homes, the average person owned few possessions for the corrosive hearth smoke and soot to ruin. By modern standards, New Yorkers—like most preindustrial people—were impoverished and lacked even the most basic amenities. According to historian Judith Flanders, in the mid-eighteenth century, “fewer than two households in ten in some counties of New York possessed a fork.” Many were desperately poor even by the standards of the day and could not afford housing. One 1788 account lamented how in New York City, “vagrants multiply on our Hands to an amazing Degree.” Charity records suggest that the “outdoor poor” far outnumbered those in almshouses.
