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U.S. trade deficits, not payments crisis: Gita Gopinath
Her remarks come amid debate over the Trump administration’s use of Section 122 to justify temporary tariffs.
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Malvika Choudhary - Tue, 24, Feb 2026
- 14:10 EST
- 23
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FILE PHOTO: First Deputy Managing Director of the International Monetary Fund (IMF) Gita Gopinath participates in a seminar during the 2025 annual IMF/World Bank Spring Meetings in Washington, D.C., U.S., April 25, 2025. / REUTERS/Elizabeth Frantz/File Photo
American economist and former deputy managing director of the International Monetary Fund (IMF), Gita Gopinath said persistent U.S. trade deficits should not be confused with a balance of payments crisis.
As debate intensifies over the Trump administration’s use of Section 122 of the Trade Act of 1974 to justify temporary tariffs, Gopinath wrote in a post on X that while she could not comment on its legality, she wanted to clarify what she described as widespread confusion over U.S. trade deficits and balance of payments risks.
Also Read: Trump fumes against the world as his tariffs come up short
Gopinath drew a distinction between long-running trade imbalances and an acute balance of payments crisis, likening the former to “chronically high cholesterol” and the latter to “having a heart attack.”
I cannot speak to what is a 'legally' sound application of Section 122, however I can make the following economic points as there is much confusion about persistent US trade deficits and a balance of payment crisis. The difference is similar to suffering from chronically high…
— Gita Gopinath (@GitaGopinath) February 24, 2026
“U.S. trade deficits are large and need to be brought down. Reducing U.S. fiscal deficits is important,” she wrote whileadding that there was “no doubt in the U.S. ability to pay the world and therefore no crisis.” In such a situation, she said the United States was facing “high cholesterol but not a heart attack.”
Accordding to Gopinath, the U.S. last experienced a genuine balance of payments crisis in the early 1970s, when the dollar was pegged to gold and other currencies were pegged to the dollar. She said the risk of the U.S. running out of gold to meet its international obligations led to the collapse of the Bretton Woods system.
She added that the difference between persistent trade deficits and a balance of payments crisis was substantive, not semantic, and that the policy responses required to address each were not the same. A 150-day tariff, she said, could not reduce persistent trade deficits.
Her remarks come amid a shift by the Trump administration to Section 122 as the legal basis for sweeping tariffs, after a U.S. Supreme Court decision struck down tariffs imposed under the International Emergency Economic Powers Act, ruling that the authority did not extend to broad, global duties.
Section 122 allows the president to impose temporary tariffs of up to 15 percent for 150 days to address what the law describes as large and serious balance of payments deficits.
A 10 percent global tariff took effect on Feb. 24, and the administration has signaled it intends to raise the rate to 15 percent under that authority.
The move has sparked debate among economists and legal scholars over whether current U.S. economic conditions meet the statute’s criteria. The administration has cited the roughly $1.2 trillion U.S. goods trade deficit and a current account deficit of about 4 percent of gross domestic product as justification.
The legal basis for invoking Section 122 has also been challenged by lawyers, including Indian-American attorney Neal Katyal, who has argued publicly that the provision was not intended to address persistent trade imbalances and questioned its applicability in the current context.
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