There has been a single legal provision that has changed the way that international business is conducted. Section 122 of the Trade Act of 1974 has emerged as a focal point in recent tariff discussions, with potential implications for trade between the United States and India.
One day last week, President Trump made an announcement about a 10 per cent increase on all imported goods. Then, within 24 hours, he raised that number to 15 per cent. President Trump cited Section 122 of the Trade Act of 1974 as the legal basis for the proposed tariffs, following judicial scrutiny of earlier emergency trade measures.
The move represents a shift from previously targeted tariff measures to a broader trade action that could affect multiple trading partners.
What Is Section 122?
Under section 122, the President of the United States may impose a maximum tariff rate of 15 per cent and/or establish import quotas on foreign goods without lengthy procedures within 150 days of a large and serious BOP (Balance of Payments) deficit. If Congress does not formally approve an extension after this period, the tariff or quota will automatically lapse. Any extension beyond 150 days would require congressional approval, and further trade action would be subject to additional legal and political review.
The use of Section 122 in this context has drawn attention from legal experts, some of whom believe it could face statutory or constitutional challenges. The term ‘BOP’ traditionally included more than just trade deficits; it also included capital flows, services, and any items not traded as goods (intellectual property). Therefore, the question of whether current economic conditions fall within the original definition of BOP will likely be appealed to the courts.
Also Read: Uday Bhanu Chib Arrested After Shirtless Protest at AI Summit 2026
What It Means for India
There will be uncertainty for Indian exporters, as goods entering the United States could face an additional tariff of up to 15 per cent for up to 150 days.
Previously, the United States had imposed higher tariffs on certain Indian goods, and the two countries were reportedly discussing interim trade arrangements aimed at reducing some of those duties. The proposed tariff adjustments had not yet taken effect at the time of the legal developments.
An Indian delegation had been expected to travel to Washington for further trade discussions, though the timeline may now be subject to change.
Other Legal Tools in Play
In addition to using Section 122 as a trade remedy, the US has other tools available—including Section 301, which allows for the imposition of punitive tariffs without limits on the size of the tariff, based upon the claim that a country is utilising unfair trade practices; Section 232, which allows for tariffs to be imposed on national security grounds; and Section 338 of the Tariff Act of 1930, which allows for tariffs of up to 50 per cent to be imposed against a trading partner who is being discriminated against.
Each of these actions comes with its own procedure and associated political costs.
Between India and the US, the issue has moved beyond simply negotiating for a single line item tariff; it has become one of trust, time, and whether or not these two countries can come to an agreement before there is further escalation in a highly volatile trade environment.
Also Read: Net Run Rate Nightmare: India Waits on Others After Heavy Defeat
