INSIGHTi

The International Emergency Economic
Powers Act (IEEPA) and Tariffs: Historical
Background and Key Issues
June 5, 2019
President Donald J. Trump recently announced his intention to use powers granted to the President under
the International Emergency Economic Powers Act (IEEPA) (50 U.S.C. §§ 1701 et seq.) to impose and
gradually increase a 5% tariff on all goods imported from Mexico until “the illegal migration crisis is
alleviated through effective actions taken by Mexico.” Invoked in response to an “unusual and
extraordinary threat, which has its source in whole or substantial part outside the United States,” no
President has previously used IEEPA to impose tariffs on a specific country. Using IEEPA’s precursor
statute, the Trading with the Enemy Act of 1917 (TWEA), however, President Nixon imposed a 10%
tariff on all imports into the United States in response to a monetary crisis.
President Nixon’s Emergency Tariff
In 1971, the United States was facing a balance-of-payments crisis as a result of the inflexibility of the
Bretton Woods monetary order, and reform seemed increasingly necessary. Several reports compiled by
the Nixon Administration suggested a series of reforms that would require key economic partners in
Europe and Asia to revalue their currencies voluntarily. To garner negotiating leverage, the reports
recommended, among other things, suspending gold convertibility and imposing trade restrictions. When
discussing such options in the Oval Office, Nixon reacted positively to the suggestions, commenting, “the
import duty delights me.” Under the General Agreement on Tariffs and Trade (GATT), such measures had
generally been tolerated at the time when there were balance-of-payments crises.
On August 15, 1971, President Nixon issued Proclamation 4074, which declared a national emergency
under TWEA and imposed a 10% ad valorem supplemental duty on all dutiable articles imported into the
United States. That evening, in a televised address to the nation, President Nixon outlined his new
economic policy, the targets of which were unemployment, inflation, and international speculation. He
addressed the supplemental duty specifically:
I am taking one further step to protect the dollar, to improve our balance of payments, and to increase
jobs for Americans. As a temporary measure, I am today imposing an additional tax of 10% on
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IN11129
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goods imported into the United States. This is a better solution for international trade than direct
controls on the amount of imports.
This import tax is a temporary action. It isn't directed against any other country. It is an action to
make certain that American products will not be at a disadvantage because of unfair exchange rates.
When the unfair treatment is ended, the import tax will end as well.
While the tariff was not explicitly “directed against any other country,” the Nixon Administration was
primarily concerned with compelling Japan to negotiate a 24% revaluation of the Japanese yen. Then-
national security council chairman Henry Kissinger’s staff economist described the surcharge as “a
bargaining lever to get other countries to revalue their currencies.” Then-Under Secretary of the Treasury
for Monetary Affairs Paul Volcker, likewise, thought, “the president had been convinced that [the import
surcharge] was both an essential negotiating tactic and a way to attract public support.”
Over the next several months, the Administration negotiated with the G-10 to resolve the monetary crisis
and convince West Germany and Japan to revalue their currencies. On December 18, 1971, speaking from
the Commons Room at the Smithsonian Institution Building, President Nixon announced the conclusion
of the Smithsonian Agreement, which he billed as “the most significant monetary agreement in the history
of the world.” Among the provisions were a 16.9% revaluation of the yen. Two days later, President
Nixon removed the supplemental duties.
In response to the import surcharge, several importers filed suit alleging that Nixon lacked the authority to
impose the surcharge. The Government argued that it had the authority to impose the import surcharge
under section 5(b)(1)(B) of TWEA. The United States Court of Customs and Patent Appeals held in
United States v. Yoshida International that it was “incontestable that [TWEA] does in fact delegate to the
President, for use during war or during national emergency only, the power to ‘regulate importation’” and
upheld the President’s action, in part because it “bore an eminently reasonable relationship to the
emergency confronted.” A year later, the court held the same in another case.
When testifying before Congress on reforms to TWEA in 1977, Andreas F. Lowenfeld, one of the premier
practitioners and scholars of international economic law in the United States, spoke disapprovingly about
President Nixon’s actions and said that he found the Court of Customs and Patent Appeals reasoning in
Yoshida “thin.” He recommended, among other things, changing the language of the statute.
Despite Lowenfeld’s recommendation, Congress maintained the language of section 5(b)(1)(B) of TWEA
in section 203(a)(1)(B) of IEEPA. Additionally, Congress gave the President the explicit power to impose
temporary import surcharges in response to balance-of-payments issues in section 122 of the Trade Act of
1974.
Issues for Congress
Unlike Nixon’s import surcharge, President Trump’s proposed tariff would be subject to the procedures of
the National Emergencies Act of 1976 (NEA) (50 U.S.C. §§ 1601 et seq.), which requires that the
President specify “the provisions of law under which he proposes that he, or other officers, will act.” He
may specify these provisions “either in the declaration of a national emergency, or by one or more
contemporaneous or subsequent Executive orders.” IEEPA, however, may only be used “to deal with any
unusual and extraordinary threat, which has its source in whole or substantial part outside the United
States, to the national security, foreign policy, or economy of the United States….” The authorities
granted by IEEPA “may only be exercised to deal with an unusual and extraordinary threat with respect to
which a national emergency has been declared for purposes of this chapter and may not be exercised for
any other purpose.” Moreover, “[a]ny exercise of such authorities to deal with any new threat shall be
based on a new declaration of national emergency which must be with respect to such threat.”

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The President did not cite IEEPA in Proclamation 9844, which declared a national emergency at the
border and some Members of Congress from both parties as well as trade groups have debated whether
the President may invoke IEEPA in an executive order referencing Proclamation 9844 or whether he will
need to declare a new national emergency. To date, IEEPA has not been invoked in an executive order
issued subsequent to a declaration of national emergency.
Because IEEPA is subject to the NEA, its powers may only be exercised with respect to a declared
national emergency. Should the President ultimately decide to invoke IEEPA authority to impose a tariff,
Congress may attempt to terminate the national emergency upon which the action is based by enacting a
joint resolution of disapproval using the expedited procedures provided by the NEA.


Author Information

Christopher A. Casey

Analyst in International Trade and Finance




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