Harvard Professor and former IMF First Deputy Managing Director Gita Gopinath has dismissed claims that the U.S. is facing a balance-of-payments (BoP) crisis, arguing that the administration's new 150-day tariffs are an ineffective tool for long-term economic stability.
Diagnosis: Cholesterol, Not A Heart Attack
Gopinath reframed the current U.S. trade gap through a medical lens, comparing persistent trade deficits to “chronically high cholesterol” while describing a true BoP crisis as a “heart attack”. She asserted that the U.S. currently suffers from the former but is nowhere near the latter.
“A 150-day tariff cannot reduce persistent trade deficits and the U.S. is not having a heart attack,” Gopinath posted on X, directly challenging the justification for invoking Section 122 of the Trade Act of 1974.
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…
President Trump invoked Section 122 to impose a 15% global tariff—a move which is a five-month bridge intended to buy time while other investigations are completed.
However, PIIE experts Kimberly Clausing and Maurice Obstfeld warn that this “arcane and inapplicable” authority is likely to lapse before any Supreme Court judgment can be rendered.
The Peterson Institute (PIIE) emphasized that U.S. fiscal policy, rather than international payments, is the real driver of the deficit. They noted that under a floating exchange rate, the U.S. faces “no difficulty financing” its current account deficits.
Expert Consensus On A ‘Non-Crisis’
Other experts took to X to echo Gopinath's skepticism. Mark Sobel, a former Treasury official, argued that BoP crises are artifacts of the “long-dead” gold standard era.
He noted that with stable Treasury yields and a strong dollar, the deficit is a “DOMESTIC problem” rooted in fiscal policy, not an international emergency.
The BOP by definition always balances. But accepting our CA deficit is large, is that a fundamental INTERNATIONAL payments problem?
🇨🇳/🇪🇺-🇩🇪 contribute to global imbalances.
But if CA=S-I, our fiscal deficits are a huge culprit. That is a DOMESTIC problem, not international. https://t.co/UlUjR1fNmH
Similarly, Council on Foreign Relations fellow Brad Setser noted on X that while the deficit is large, financial inflows remain strong enough to fund it without drawing on reserves. Setser observed that litigation over the meaning of a “fundamental payments problem” would likely outrun the tariff’s 150-day clock.
So does the US have a balance of payments deficit for purposes of section 122 of the trade law (and thus the basis for imposing a 15% tariff).
As of Tuesday’s close, the Dow Jones index rose 1.64% year-to-date, whereas the S&P 500 was 0.46% higher and the Nasdaq Composite index was down 1.60% in 2026.
The SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust ETF (NASDAQ:QQQ), which track the S&P 500 index and Nasdaq 100 index, respectively, closed higher on Tuesday. The SPY was up 0.73% at $687.35, while the QQQ advanced 1.07% to $607.82.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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