US Claims Huge Payments Deficits to Justify Tariff at WTO as 10% Tariff Struck Down by Courts

[ABS News Service/11.06.2026]

Geneva – The United States has notified the World Trade Organization's Committee on Balance of Payments that it does not "currently envision any progressive relaxation" of the 10 percent import surcharge imposed under Section 122, even as WTO members grow skeptical about the 150-day measure being levied without prior consultation, people familiar with the developments said.

“Given that US law by default limits the import surcharge to a 150-day duration, the United States does not currently envision any progressive relaxation of the surcharge during the short time period that it is in force,” Washington maintained in document WT/BOP/G/25.

Washington explained that President Trump issued Presidential Proclamation 11012, imposing a temporary 10 percent ad valorem import surcharge on all goods imports from all trading partners, with specific product exceptions. It acknowledged that the surcharge applies on top of existing US bound tariff rates. The measure is explicitly temporary, effective from February 24, 2026 and scheduled to terminate on July 24, 2026, unless extended by an Act of Congress.

Justifying the 10 percent surcharge due to a “large and serious” US balance-of-payments deficit, Washington argues that such a deficit poses significant risks not only to its own economy but to the global economy, given its central role. Relying on data from the US Bureau of Economic Analysis, the Council of Economic Advisers, the International Monetary Fund and public economic literature, the world's largest economy says it is facing a fundamental and dangerous external imbalance that compelled the imposition of the surcharge.

The United States acknowledges that the standard BoP accounting framework – current, capital and financial accounts – nets to zero by design, but argues that Article XII of the GATT 1994 (Restrictions to Safeguard the Balance of Payments) refers to a narrower, economically meaningful concept of deficit. According to Washington, multiple credible methodologies – from the narrow current account balance to broader measures including the capital account and net foreign direct investment – all confirm a large and serious deficit as of February 20, 2026.

The United States provided the following data:

· Primary Measure (Current Account): As of 2024, the annual US current account deficit stood at $1.2 trillion, or -4.0 percent of GDP. This is described as the largest deficit since 2008, nearly double the -2.0 percent of GDP average between 2013 and 2019.

· Trade Balance: The goods and services trade deficit, the largest component of the current account, reached $1.2 trillion in 2024 and remained at that level in 2025 – a 40 percent increase from 2019.

· Broader Measures (Current + Capital + Net FDI): Even this more volatile and inclusive metric, tells the same story: a prolonged, large, and worsening deficit over decades.

· IMF Confirmation: The United States cites the IMF's 2026 Article IV consultation, noting that IMF Directors “expressed concern about the size and persistence of the US current account deficit,” which is projected to remain above 3.6 percent of GDP through 2031, deteriorating from 3.7 percent in 2025 to 3.8 percent in 2026.

Deficit Is Serious

Washington argues that the deficit is not just large but “serious” due to its connection to the net international investment position – the difference between US-owned foreign assets and foreign-owned US assets. The United States maintains that as of 2024, its net IIP reached -90 percent of GDP. Describing such a situation as “highly atypical” for an economy like the United States, Washington says this is the largest negative IIP in the world in dollar terms, and one of the most negative among developed countries as a share of GDP. The United States, it states, has become a “large debtor.”

The IMF has previously warned that such a large negative IIP increases susceptibility to exchange rate fluctuations, market conditions and a loss of investor confidence, as well as a higher share of domestic cash flows accruing to foreigners at the expense of US households.

However, the IMF never proposed a surcharge or an increase in tariffs from the US bound tariff schedule, a person familiar with the developments suggested.

Suggesting a loss of the dollar's “exorbitant privilege” – a term coined by former French President Valéry Giscard d'Estaing – the United States says that historically, it ran a positive primary income balance (returns on foreign assets exceeding payments on liabilities), which offset trade deficits.

However, the primary income balance fell sharply in 2024, recording the first negative annual reading since 1960 – the largest year-over-year drop on record. This stabilizing force, the Washington argues, has vanished.

Unsustainable

Further, the United States maintains that current account deficits persistently between 2 percent and 5 percent of GDP are considered unsustainable, pointing out that large deficits eventually require adjustment via currency depreciation, reduced consumption, and increased exports. It suggests that the more negative the IIP, the greater the risk of a sudden, costly adjustment.

The United States stresses in the document that as the world's largest economy (generating more than 20 percent of global income), its BoP problems are a serious concern for all WTO members, adding that any disruption or adjustment in the US economy will have substantial global implications.

In its description of the import restriction, the United States detailed the temporary 10 percent ad valorem import surcharge on all goods imports from all trading partners for 150 days, which applies in excess of existing U.S. bound WTO tariff rates, with exemptions for several categories of products, including certain critical minerals, specific agricultural products (beef, tomatoes, oranges), pharmaceuticals, and others.

As a legal basis for the 10 percent surcharge, Washington cites dual authority: Section 122 of the Trade Act of 1974, and WTO law – GATT Article XII, the 1994 Understanding, and the 1979 Declaration. In short, it maintains that the action is fully consistent with these provisions, which permit import restrictions to safeguard a Member's external financial position and BoP.

The US defense of its 10 percent surcharge on BoP grounds raises several sharp concerns, said a WTO member who asked not to be quoted. It appears to be effectively rewriting a key WTO term, particularly Article XII of the GATT 1994, which was drafted in the Bretton Woods era of fixed exchange rates and capital controls, when “BoP difficulties” clearly meant an inability to finance current account transactions.

However, the US dollar is the world's reserve currency, the US borrows in its own currency and capital flows are vast and liquid. A current account deficit is not inherently a “crisis” – it is the mirror image of the US role as global supplier of safe assets, the member suggested.

The IMF, which the US cites for concern, has not called for import surcharges. The IMF's Article IV consultations typically recommend exchange rate flexibility and fiscal adjustment, not across-the-board tariffs. By cherry-picking IMF concern while ignoring its policy prescriptions, the United States engages in selective citation, said an analyst.