Trade Wars and Tariffs

[NorthDallas40]

“or saved”.

If the funds haven’t been invested in the debt market, they’ve reduced the balance that dot gov is paying interest on. Either way, the USA’s obligation is netted out as a wash with the nominal interest to be paid as outlined in the article.

Spent on reducing the deficit? You’re precious

 

[Thunder Good-Oil]

Spent on reducing the deficit? You’re precious

I didn’t say “deficit”.

Where do you think that the tariff dollars that were collected are sitting on the federal balance sheet?

 

[NorthDallas40]

I didn’t say “deficit”.

Where do you think that the tariff dollars that were collected are sitting on the federal balance sheet?

No I said deficit. Because that’s how we run our budget management or lack there of. I think they are sitting in the “spent” column. If you’ve got any actual data claiming otherwise I’d be happy to see it.

 

[Thunder Good-Oil]

No I said deficit. Because that’s how we run our budget management or lack there of. I think they are sitting in the “spent” column. If you’ve got any actual data claiming otherwise I’d be happy to see it.

Try looking at a basic accounting textbook instead.

 

[NorthDallas40]

Try looking at a basic accounting textbook instead.

Oh all I’ve got to do is look at a US deficit counter and I’ve got all the info I need on your crazy ass comments on interest offset or saved

 

[Thunder Good-Oil]

Oh all I’ve got to do is look at a US deficit counter and I’ve got all the info I need on your crazy ass comments on interest offset or saved

You obviously don’t understand the simplest concept of money. Carry on.

 

[NorthDallas40]

You obviously don’t understand the simplest concept of money. Carry on.

Oh that must be it

 

[Thunder Good-Oil]

Oh that must be it

You're embarrassing yourself.

 

[BigOrangeMojo]

I didn’t say “deficit”.

Where do you think that the tariff dollars that were collected are sitting on the federal balance sheet?

Nowhere on the balance sheet. Those have already been spent.....

So, the tariffs would have reduced the interest we paid last year (via smaller operating deficit). Paying it back with interest (which will offset those savings from last year) plus paying interest on what we have to borrow to pay it back...

 

[NorthDallas40]

You're embarrassing yourself.

Clearly

 

[NorthDallas40]

Nowhere on the balance sheet. Those have already been spent.....

So, the tariffs would have reduced the interest we paid last year (via smaller operating deficit). Paying it back with interest (which will offset those savings from last year) plus paying interest on what we have to borrow to pay it back...

You’re embarrassing yourself

 

[Thunder Good-Oil]

Nowhere on the balance sheet. Those have already been spent.....

So, the tariffs would have reduced the interest we paid last year (via smaller operating deficit). Paying it back with interest (which will offset those savings from last year) plus paying interest on what we have to borrow to pay it back...

Either those dollars are sitting on the left side of the balance sheet earning interest or the dollars that were spent are reduced (less obligation on the right side) by those tariffs that were collected. Either way the net interest to the federal government is lower by their rate on the collected tariffs. The article linked above is ignoring the interest benefit by holding the money while only focusing on the interest to be paid on any refunds that materialize. The total net interest is a wash.

 

[BigOrangeMojo]

Either those dollars are sitting on the left side of the balance sheet earning interest or the dollars that were spent are reduced (less obligation on the right side) by those tariffs that were collected. Either way the net interest to the federal government is lower by their rate on the collected tariffs. The article linked above is ignoring the interest benefit by holding the money while only focusing on the interest to be paid on any refunds that materialize. The total net interest is a wash.

Issue is we increased spending (defense, specifically) under the assumption we would have this revenue prospectively...

We didnt really cut deficit spending last year with the additional revenue. We just moved it around. This year, same deficit hole plus extra amount for these refunds...

You'd be right on interest cost if we kept spending constant but we didnt...

 

[MontyPython]

Trump loses... Again...

U.S. Court Takes First Steps Toward Ordering Tariff Refunds

The Trump administration is likely to appeal the move, as it ramps up its attempt to slow or potentially block the repayment of billions in past duties.

A federal judge on Wednesday ordered the Trump administration to take the first steps toward issuing more than $100 billion in potential tariff refunds, ratcheting up a legal battle over a roster of sky-high duties that the Supreme Court deemed illegal.

The order, issued by Judge Richard K. Eaton of the United States Court of International Trade, amounted to an early victory for the thousands of businesses that have already sued to recover the taxes they paid, plus interest, now that President Trump’s global tariffs have been struck down. Last month, the Supreme Court ruled that Mr. Trump could not use the International Emergency Economic Powers Act, or IEEPA, to impose tariffs on U.S. trading partners.

Many trade lawyers said they were still deciphering the scope of the judge’s three-page directive. But they generally agreed that its mandate could prove short lived, with the Trump administration expected to quickly challenge it. Judge Eaton has scheduled a hearing in the case for Friday.

In the initial round of lawsuits over its tariffs, the Trump administration had indicated that it would issue refunds in the event that the president’s tariffs were invalidated. But Mr. Trump and his aides have shifted to a more defiant tone since the Supreme Court dealt a decisive blow to one of the most potent, flexible weapons in the president’s trade war. The administration has signaled that it intends to delay or contest repayment of the money, arguing at times that refunds could create a fiscal crisis for the United States

 

[MontyPython]

Rinse. Repeat.

Our next opportunity to tax ourselves, then repay importers once SCOTUS ultimately finds that The Orange Menace violated the law again.

States sue Trump administration over new 'unlawful' global tariffs​

Two dozen states in the US have sued the Trump administration, seeking to block the latest tariffs announced by the White House.

The lawsuit, filed on Thursday, adds to the uncertainties surrounding trade policy, after the Supreme Court ruled that many of the duties Trump had announced last year were illegal.

The White House swiftly responded by imposing a temporary 10% tariff under a different law - Section 122 of the Trade Act of 1974.

But the state officials, all Democrats, say that tariff is also illegal, arguing that the law was not meant to address trade imbalances.

According to the lawsuit, which is led by New York, California, Oregon and Arizona, the Trump administration's imposition of tariffs also violates the US Constitution because Congress, not the president, has the power to impose sweeping tariffs, which are taxes on imports.

"He's calling it a fix. It is not," Arizona Attorney General Kris Mayes said at a press conference announcing the lawsuit.

"It is the same illegal power-grab under a different statute than he used the last time."
White House spokesperson Kush Desai said the use of the law was legitimate and that the administration would "vigorously" defend the tariffs in court.

The president is "using his authority granted by Congress to address fundamental international payments problems and to deal with our country's large and serious balance-of-payments deficits", he added.

 

[MontyPython]

Does the president meet the criteria to impose new tariffs justified by Section 122 of the Trade Act of 1974?

**Short answer:** It is **legally disputed whether the president meets the criteria** under **Section 122 of the Trade Act of 1974**. Many economists and legal scholars argue **the criteria are not met**, though the president has claimed the authority anyway.

Here is how the law works and how current U.S. conditions compare.

---

## 1. What Section 122 actually allows

Under **Section 122 of the Trade Act of 1974**, the president may impose a **temporary import surcharge (tariff) of up to 15% for up to 150 days** if the U.S. faces certain international payments problems.

The statute lists three possible triggers:

1. **Large and serious U.S. balance-of-payments deficits**
2. **An imminent and significant depreciation of the U.S. dollar** in foreign-exchange markets
3. Cooperation with other countries to correct an **international payments imbalance**

Important constraints:

* Tariffs must generally apply **across all countries**.
* They are **temporary (max 150 days)** unless Congress extends them. ([Covington & Burling][1])

---

## 2. Key issue: What counts as a “balance-of-payments deficit”

This is where the controversy arises.

A **balance-of-payments deficit is not the same as a trade deficit**.
The balance of payments includes:

* Trade in goods and services
* Investment income
* Financial flows (capital inflows/outflows)

Because the U.S. receives huge foreign investment inflows, its **financial-account surplus usually offsets the trade deficit**, meaning the overall balance of payments is roughly balanced. ([CGTN News][2])

---

## 3. Do current U.S. conditions meet the legal threshold?

Many analysts say **no**, for two main reasons.

### (a) The U.S. does not have a “fundamental international payments problem”

Economists note that despite a large trade deficit, the U.S. has **large capital inflows**, meaning the overall balance of payments is not in crisis. ([CGTN News][2])

### (b) The dollar is not collapsing

Section 122 also allows tariffs to prevent a **sharp dollar depreciation**, but there is currently **no imminent currency crisis**. ([GovFacts][3])

Because these conditions are missing, some experts argue the statute **cannot legally justify the tariffs**. ([mint][4])

---

## 4. Why the law exists (historical context)

Section 122 was written in the early 1970s when:

* The **Bretton Woods system** tied currencies to fixed exchange rates.
* Countries could run out of foreign reserves defending their currency.

After the U.S. moved to **floating exchange rates in 1973**, the type of balance-of-payments crisis the law was designed for largely disappeared. ([ielp.worldtradelaw.net][5])

That is one reason **Section 122 had never been used before recently**. ([Covington & Burling][1])

---

**Bottom line**

* Section 122 allows temporary tariffs **only if the U.S. faces a serious balance-of-payments crisis or currency collapse risk**.
* The U.S. currently has **a trade deficit but not a balance-of-payments crisis**.
* Therefore **many economists and legal analysts argue the criteria are not met**, though the administration may still attempt to use the authority and let courts decide.

---

If you want, I can also explain **the difference between a trade deficit and a balance-of-payments deficit**—that distinction is exactly what this legal argument hinges on.

[1]: IEEPA Tariffs Terminated, Replacement Section 122 Tariffs Take Effect "IEEPA Tariffs Terminated, Replacement Section 122 Tariffs Take Effect | Covington & Burling LLP"
[2]: https://news.cgtn.com/news/2026-02-...1KZN2ER2W0o/index.html?utm_source=chatgpt.com "Will Section 122 tariffs succeed where IEEPA failed? - CGTN"
[3]: https://govfacts.org/policy-securit...ess-actually-intended/?utm_source=chatgpt.com "Section 122 of the 1974 Trade Act Was Designed for Emergencies. Here's What Congress Actually Intended. | GovFacts"
[4]: https://www.livemint.com/news/us-ne...rk-11771746626175.html?utm_source=chatgpt.com "Experts warn Donald Trump's new tariffs are also illegal. Here's why they think Section 122 won't work | Today News"
[5]: https://ielp.worldtradelaw.net/2026...the-trade-act-of-1974/?utm_source=chatgpt.com "Guest Post: Presiden
t Trump Cannot Legally Impose Tariffs Using Section 122 of the Trade Act of 1974"

 

[Thunder Good-Oil]

Issue is we increased spending (defense, specifically) under the assumption we would have this revenue prospectively...

We didnt really cut deficit spending last year with the additional revenue. We just moved it around. This year, same deficit hole plus extra amount for these refunds...

You'd be right on interest cost if we kept spending constant but we didnt...

Trump has PROPOSED increasing the defense budget to $1.5T and JUSTIFYING it based on expected tariff revenues. Take away the tariffs and either the defense budget stays at that level (therefore not CAUSED by projected tariff revenues) or the defense line stays flat or has the customary bump.

The tariffs were collected starting last year. The accompanying authorized spending was in Biden’s budget.

 

[BeardedVol]

Trump has PROPOSED increasing the defense budget to $1.5T and JUSTIFYING it based on expected tariff revenues. Take away the tariffs and either the defense budget stays at that level (therefore not CAUSED by projected tariff revenues) or the defense line stays flat or has the customary bump.

The tariffs were collected starting last year. The accompanying authorized spending was in Biden’s budget.

Wasn't the goal of the tariffs to repatriate manufacturing to the United States, which would in turn, lower tariff revenue?

 

[MontyPython]

Trump has PROPOSED increasing the defense budget to $1.5T and JUSTIFYING it based on expected tariff revenues. Take away the tariffs and either the defense budget stays at that level (therefore not CAUSED by projected tariff revenues) or the defense line stays flat or has the customary bump.

The tariffs were collected starting last year. The accompanying authorized spending was in Biden’s budget.

 

[BigOrangeMojo]

Trump has PROPOSED increasing the defense budget to $1.5T and JUSTIFYING it based on expected tariff revenues. Take away the tariffs and either the defense budget stays at that level (therefore not CAUSED by projected tariff revenues) or the defense line stays flat or has the customary bump.

The tariffs were collected starting last year. The accompanying authorized spending was in Biden’s budget.

Trump got 250-300B for HSA/Border and Defense last year. A small portion of that was offset with govt savings with rest being tariff revenue.

Well, a big chunk of those tariffs are gone. The huge defense/HSA/border still remains and yes, Trump has PROPOSED to increase defense by another half trillion annually.

 

[Thunder Good-Oil]

Wasn't the goal of the tariffs to repatriate manufacturing to the United States, which would in turn, lower tariff revenue?

That was one of the projected outcomes. The income taxes on additional domestic manufacturing (the company profits AND the payroll taxes) ought to more than offset tariff revenue reductions when imports decline.

I like the strategy of getting something in return for giving access to the US consumers. It will vary country by country. Some just need a reason to not enable China. The CCP needs to be penalized for being a bunch of a-holes. Some need to open their consumer markets. Some need retaliatory penalties for their import policies (blocking certain products, VATs, etc). Some need to be pushed back on for human rights abuses. Or contributing to illegal migration or the illegal drugs being brought to the US. It’s better to penalize the bad players financially and changing the bad behavior than by dropping bombs.

 

[BeardedVol]

That was one of the projected outcomes. The income taxes on additional domestic manufacturing (the company profits AND the payroll taxes) ought to more than offset tariff revenue reductions when imports decline.

I like the strategy of getting something in return for giving access to the US consumers. It will vary country by country. Some just need a reason to not enable China. The CCP needs to be penalized for being a bunch of a-holes. Some need to open their consumer markets. Some need retaliatory penalties for their import policies (blocking certain products, VATs, etc). Some need to be pushed back on for human rights abuses. Or contributing to illegal migration or the illegal drugs being brought to the US. It’s better to penalize the bad players financially and changing the bad behavior than by dropping bombs.

How so? Tariff revenue was also supposed to replace income tax as well, remember?

Trump touts tariffs as path to end income taxes; experts skeptical

Trump proposed replacing income taxes with tariffs in his State of the Union, but experts say the plan could raise prices and hurt poorer Americans.

www.scrippsnews.com

 

[Thunder Good-Oil]

How so? Tariff revenue was also supposed to replace income tax as well, remember?

Trump touts tariffs as path to end income taxes; experts skeptical

Trump proposed replacing income taxes with tariffs in his State of the Union, but experts say the plan could raise prices and hurt poorer Americans.

www.scrippsnews.com

The headline doesn’t match the text of the article.

 

[BeardedVol]

The headline doesn’t match the text of the article.

Do you need the lie refreshed in your memory?

 

[Thunder Good-Oil]

Do you need the lie refreshed in your memory?

He said that he BELIEVES that the tariffs will “substantially replace” the modern day system of income tax taking a great financial burden off the people that he loves.

Which part is the lie?