KUALA LUMPUR: An economist has questioned the legal basis of U.S. President Donald Trump's new tariffs, saying Washington may be relying on a law never intended for modern trade disputes.

Asia School of Business CEO Joseph Cherian said the Section 122 of the Trade Act of 1974 was introduced in the 1970s to deal with balance of payments problems faced by the U.S..

"We don't have that problem anymore.

"So, you have to realise that many of these laws were created for the context or circumstances that existed at the time," he told AWANI International.

A balance of payments problem occurs when a country imports more goods and services than it exports.

Section 122 of the Trade Act of 1974 emerged from the economic turmoil of the early 1970s, when the U.S. faced serious balance of payments deficits.

At the time, the global monetary system was shifting away from fixed exchange rates, where currencies were pegged to the U.S. dollar and backed by gold.

The U.S. later introduced the provision to temporarily raise tariffs or restrict imports to reduce the amount of money flowing out of the country.

Although the U.S. still imports far more goods than it exports today, with its goods trade deficit exceeding USD1 trillion in recent years, the dollar now floats freely and is no longer tied to gold as it was during the balance of payments crisis of the 1970s.

Cherian also said the provision was designed as a temporary measure, adding that the law only allows tariffs to be imposed for up to 150 days.

He added that previous tariffs imposed by the U.S. had also failed to achieve their intended goals.

Countries such as China found alternative ways to work around the measures, including redirecting trade flows and reducing exports to the U.S., he said.

"Instead of asking whether tariffs will change things, we should recognise that tariffs are not good," Cherian said.

The debate over Section 122 of the Trade Act of 1974 followed a major legal setback for Trump's tariff policy after the U.S. Supreme Court ruled that many of his tariffs unlawfully relied on emergency powers.

He then introduced new global tariffs under the provision, starting at 10% and potentially rising to the 15% legal limit, which can only remain in place for 150 days without congressional approval.