00:00The legal basis of U.S. President Donald Trump's new tariffs is under scrutiny,
00:06with some arguing that Washington is relying on a law never designed for modern trade disputes.
00:12Asia's School of Business CEO Joseph Cherian says Section 122 of the Trade Act of 1974
00:19was created to address a U.S. balance of payments problems during the economic turmoil of the early 1970s.
00:29The U.S. is trying other mechanisms and other laws to impose a tariff as well,
00:34this 10% to 15% tariff through what they call Section 122, which again was created for another purpose.
00:40It was to address the balance of payment problems back then as they were moving back in 1974
00:45when they're moving from the fixed exchange regime to a floating rate exchange regime.
00:52We don't have that problem anymore.
00:53So, you know, you have to realise that a lot of these laws were created for the context that existed
00:59or circumstances that existed at that time.
01:02At the time, the U.S. faced large deficits while the global monetary system was shifting away
01:07from fixed exchange rates tied to the U.S. dollar and gold.
01:11The provision allowed the U.S. government to temporarily raise tariffs
01:15or restrict imports to reduce money flowing out of the country.
01:18Although the U.S. still imports far more goods than it exports today,
01:23with its goods trade deficit exceeding $1 trillion in recent years,
01:27the dollar now floats freely and is no longer tied to gold
01:31as it was during the balance of payments crisis of the 1970s.
01:35First, secondly, it is only 150 days long.
01:40Many people forget it's not going to be forever.
01:43The law says it has to only last 150 days.
01:47Cherian also said that tariffs rarely achieve their intended goals,
01:52as countries often adjust by redirecting trade or reducing exports to the U.S.
01:58So, did it achieve the purpose that the tariffs were imposed?
02:04Probably not, not at least in China's case,
02:06because there are alternative mechanisms in place to circumvent it,
02:09and they just reduce exports to the U.S.
02:11So, my view is that, instead of saying, is it going to change,
02:16it's just that tariffs are not good.
02:19The debate over Section 122 of the Trade Act of 1974
02:23came in the wake of the U.S. Supreme Court decision
02:26that ruled several of Trump's earlier tariffs had unlawfully relied on emergency powers.
02:31Trump has since introduced new global tariffs under the provision,
02:36starting at 10 percent and potentially rising to the 15 percent legal limit.
02:40Trump has since introduced new global tariffs under the provision,
02:45starting at 10 percent and potentially rising to the 15 percent legal limit.
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