Why These Trade Laws Exist — And What They Were Meant to Do
When Americans hear that a president is “imposing tariffs,” “declaring a national emergency,” or “taking action against unfair trade,” it can sound abstract and political. But the laws behind those actions were not written in a vacuum. They were passed during moments of real economic stress, currency instability, geopolitical tension, and growing anxiety about America’s competitive position.
To understand why these rules exist, you have to go back to the 1970s.
The Backdrop: The 1970s Were Economically Turbulent
The United States entered the 1970s in a very different position than it had in the decades after World War II. Europe and Japan had rebuilt. American manufacturing was no longer untouchable. Inflation was rising. Oil prices exploded after the 1973 OPEC embargo. The dollar was under pressure, and the U.S. trade balance was deteriorating.
For the first time in modern history, Americans felt economically vulnerable.
Congress responded by giving the executive branch stronger, faster trade tools. The assumption was simple: in a fast-moving global economy, the President needed authority to act quickly to protect U.S. economic and national security interests.
That is where the Trade Act of 1974 and later the International Emergency Economic Powers Act of 1977 come in.
Section 122 of the Trade Act of 1974
The “Emergency Brake” for Trade Imbalances
Section 122 was created for a very specific fear: that America could be overwhelmed by imports, weakening the dollar and destabilizing the economy.
In plain English, this section allows a president to temporarily impose tariffs of up to 15 percent for 150 days if there is a serious balance-of-payments problem or major decline in the dollar. It was meant to be short term — a pressure release valve.
Why did lawmakers think this was necessary?
Because just a few years earlier, in 1971, President Richard Nixon shocked the world. Facing a run on the dollar and growing trade deficits, he suspended the dollar’s convertibility into gold and slapped a 10 percent surcharge on imports. That move, known as the “Nixon Shock,” was designed to force other countries to adjust their currencies and ease pressure on American industry.
Congress essentially codified that emergency power in 1974 so future presidents wouldn’t have to improvise.
The assumed intention behind Section 122 was not long-term protectionism. It was stabilization. Lawmakers believed that if imports were surging and hurting the dollar, a temporary tariff could slow things down while negotiations occurred.
Think of it like hitting the brakes on a downhill slope — not abandoning the car, just regaining control.
Section 301 of the Trade Act of 1974
The “Unfair Trade” Weapon
Section 301 was born from a different frustration.
By the early 1970s, many Americans believed foreign countries were taking advantage of U.S. openness. While America allowed broad access to its markets, some trading partners were accused of blocking U.S. goods, subsidizing their industries, or stealing intellectual property.
Section 301 gave the U.S. Trade Representative the authority to investigate and retaliate against unfair trade practices.
This tool became prominent in the 1980s when the U.S. had serious trade tensions with Japan. At the time, Americans were worried about Japanese dominance in automobiles and electronics. Section 301 investigations led to negotiated agreements and voluntary export restraints.
Fast forward to 2018. The Trump administration used Section 301 to impose tariffs on roughly $370 billion of Chinese imports. The argument was that China engaged in forced technology transfers, intellectual property theft, and state subsidies that disadvantaged American companies.
The assumption behind Section 301 is rooted in leverage. The idea is that free trade only works if the rules are followed. If another country cheats, the U.S. must have a tool to respond.
For a layman, imagine playing in a poker game where everyone agrees to the rules — until one player starts peeking at cards. Section 301 is the mechanism that allows the referee to step in and penalize the player.
The International Emergency Economic Powers Act of 1977 (IEEPA)
The Economic Sanctions Authority
IEEPA was passed a few years later, in 1977, during another period of reassessment of presidential power. After Watergate and the Vietnam War, Congress wanted clearer rules governing national emergencies.
IEEPA allows a president to regulate or block economic transactions after declaring a national emergency tied to a foreign threat.
It has been used frequently.
In 1979, after Iran seized American hostages, President Jimmy Carter froze Iranian assets under emergency powers. After the terrorist attacks of September 11, 2001, President George W. Bush used IEEPA to block assets tied to terrorist organizations. More recently, both Republican and Democratic administrations have used it to impose sweeping sanctions on Russia.
IEEPA reflects a simple belief: financial power can be as strong as military power. If you can cut off access to the U.S. dollar and American financial institutions, you can exert enormous pressure.
The assumed intention here is national security first. But because the U.S. dollar sits at the center of global finance, sanctions often have economic side effects at home, including energy price volatility and supply disruptions.
How Tariffs Fit Into All of This
Tariffs are the most visible tool under these trade laws.
At a basic level, a tariff is a tax on imported goods. If a foreign product costs $100 and there is a 20 percent tariff, the importer now pays $120. Often that cost gets passed along to consumers.
On a large scale, tariffs can:
• Protect certain domestic industries from cheaper foreign competition
• Encourage companies to manufacture in the United States
• Provide negotiating leverage
But they can also:
• Raise prices for consumers
• Increase costs for businesses that rely on imported components
• Trigger retaliation from other countries
When tariffs were imposed on Chinese goods beginning in 2018, studies estimated that much of the cost was ultimately borne by American businesses and consumers. At the same time, certain U.S. industries gained protection from foreign competition.
So tariffs do not create economic wealth out of thin air. They shift who bears the cost.
The Bigger Intention
These laws exist because lawmakers believed that pure free markets alone were not enough in a world of competing national interests.
Section 122 was about stabilizing the dollar during crisis.
Section 301 was about enforcing fairness in global trade.
IEEPA was about using economic power to defend national security.
All three reflect a deeper assumption: economic strength is national strength.
Whether one agrees with how they are used today is a matter of policy debate. But their creation was rooted in a time when Americans felt economic instability, rising foreign competition, and geopolitical risk.
In other words, these laws were built for moments when the country felt exposed.
And history shows that those moments come around more often than we think.
Evan R. Guido, Senior Wealth Advisor, is the Founder of Aksala Wealth Advisors LLC, a 2026 Forbes Best in State Wealth Advisor, a 2018 Forbes Top Next-Gen Advisors award recipient. Evan heads a team of financial strategists for clients who consider themselves the “Millionaire Next Door.” He can be reached at 941-500-5122 Aksala.com eguido@aksalawealth.com 6260 Lake Osprey Dr. Lakewood Ranch, FL 34240. Securities offered through Cetera Wealth Services, LLC member FINRA/SIPC. Advisory Services offered through Cetera Investment Advisers LLC, a registered investment adviser. Cetera is under separate ownership from any other named entity. The views and opinions presented in this article are those of Evan R. Guido and not of Cetera or its subsidiaries. These opinions are based on Evan’s observations and research and are not intended to predict or depict performance of any investment. These views are subject to change based on subsequent developments. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. These views should not be construed as a recommendation to buy or sell any securities and purely for education and entertainment. Past performance does not guarantee future results. The Top Next Gen list includes 250 rising advisors who help manage over $490 billion in client assets. Each advisor was nominated by their firm, then vetted and ranked by SHOOK Research. The rankings, developed by SHOOK Research, are based on an algorithm of qualitative criterion, mostly gained through telephone and in-person due diligence interviews, and quantitative data. Those advisors who are considered have a minimum of four years' experience and the algorithm weighs factors like revenue trends, assets under management, compliance records, industry experience and those that encompass the highest standards of best practices. The Forbes ranking of Best-In-State Wealth Advisors, developed by SHOOK Research, is based on an algorithm of qualitative data, rating thousands of wealth advisors with a minimum of seven years' experience and weighing factors like revenue trends, assets under management, compliance records, industry experience, and best practices learned through telephone and in-person interviews. Portfolio performance is not a criteria due to varying client objectives and lack of audited data. Neither Forbes nor SHOOK receive a fee in exchange for rankings. Listings in these publications and/or awards are not guarantees of future investment success. These recognitions should not be construed as endorsements of the advisor by any clients. No compensation was provided directly or indirectly by the recipient for participation or in connection with obtaining or using these third-party ratings or award.