Section 122 of Trade Act for BoP Emergencies Invoked to Slap 15% Tariff

· Sec 122, Sec 232 and Sec 301 Options Invoked

Trump's IEEPA tariffs have now been overturned by the highest court in the US. Anyone hoping for greater clarity in the wake of the Supreme Court's historic ruling, unfortunately, isn’t about to get any. Trade chaos is set to continue, as Trump remains committed to entrenching a wide-ranging tariff wall.

What the Court Actually Did

On 20 February, the Supreme Court of the United States ruled 6–3 that the President does not have authority to impose broad tariffs under the International Emergency Economic Powers Act (IEEPA).

IEEPA had historically been used for:

· Sanctions

· Asset freezes

· Financial restrictions

It had never been used for sweeping, global tariff measures before.

This ruling invalidates:

· “Liberation Day” tariffs

· “Reciprocal” tariffs negotiated under IEEPA

· Tariffs tied to fentanyl, Russia oil purchases, etc., if based on IEEPA

Trump’s Immediate Pivot: Section 122

Within hours, President Donald Trump announced new tariffs under Section 122 of the Trade Act of 1974.

Key features of Section 122:

· Designed for balance-of-payments emergencies

· Tariffs capped at 15%

· Valid for 150 days

· Must be applied globally

· Requires Congressional extension after 150 days

This provision has never been used before.

The administration first announced a 10% rate, then increased it to 15%.

Why Legal Uncertainty Continues

Even though IEEPA tariffs are gone, clarity has not arrived.

Likely legal issues:

· Is there a real “balance-of-payments crisis”?

· Can Section 122 justify current economic conditions?

· Will courts view this as an attempt to bypass the Supreme Court ruling?

New lawsuits are highly probable.

Interaction with Section 232 and 301

The administration is expanding other trade authorities:

Section 232 (National Security)

Applies to:

· Steel

· Aluminum

· Copper

· Autos

· Lumber

· Furniture

Now expanding into:

· Semiconductors

· Electronics

· Critical minerals

· Pharmaceuticals

Section 122 tariffs do not stack on top of Section 232 tariffs.

Section 301

Country-specific tariffs for “unfair trade practices.” More investigations are planned.

Result: Even without IEEPA, tariff levels may remain high.

What Happens to the “Napkin” Trade Deals?

Roughly 20 bilateral arrangements were negotiated under IEEPA-based “reciprocal tariffs.”

Example partners:

· Japan

· European Union

· Indonesia

Now that IEEPA authority is invalid:

· Are those tariff rates still valid?

· Were those deals legally binding?

· Do they conflict with Section 122’s universal application requirement?

These agreements may face:

· Renegotiation

· Legal challenges

· Political pressure abroad

Refund Chaos: $170 Billion at Stake

Approximately $170 billion in IEEPA tariff revenue has already been collected.

Likely outcome:

· Refunds processed by U.S. Customs and Border Protection

· Paid to the importer of record

· Exporters receive nothing unless contracts require sharing

Expect:

· Administrative complexity

· Legal disputes

· Smaller firms disadvantaged

De Minimis Suspension Continues

The suspension of the $800 de minimis threshold (also originally tied to IEEPA) has now been restructured under other authorities.

Result:

· All imports subject to tariff and full customs declaration

· Increased compliance burden

· Higher landed costs

Big Picture: Why Trade Chaos Continues

The Court clarified one thing:

IEEPA cannot be used for broad tariffs.

But it did not limit:

· Section 122

· Section 232

· Section 301

So while one tool was removed, others remain active — and may expand.

For businesses (especially importers, exporters, and customs professionals like yourself), the key risks are:

· Rapid tariff shifts

· Legal reversals

· Refund uncertainties

· Contract exposure

· Supply chain re-routing

[ABS News Service/23.02.2026]

President Donald Trump came back into office last year promising to upend decades of fairly settled trade policies. Convinced that foreigners were “ripping off” America, he swiftly imposed higher tariffs on imported goods worldwide on 2 April, an occasion he dubbed “Liberation Day”.

The “Liberation Day” tariffs, suspended on 9 April after a market tailspin and then reinstated on 7 August with some adjustments, sent US tariffs to their highest levels since the 1930s; rates were set as high as 50%. Trump imposed them using a 1977 US statute known as the International Emergency Economic Powers Act (IEEPA), until then never used for wide-ranging tariffs.

These tariffs have now been overturned by the highest court in the United States. The Supreme Court, in a 6-3 ruling, declared on 20 February that the President did not have authority to impose any tariffs under IEEPA.

Trump turns to Section 122

Rather than reflecting on the Court’s stunning rebuke of the way he used Executive Branch power, Trump has chosen to double down on his tariff escapades. He

announced, within hours of the Court ruling, a new set of policies under a different US statute called Section 122 of the Trade Act of 1974.

These new tariffs are set to start on 24 February. Having first announced a globally applied rate of 10%, Trump then increased the level just hours later via a social media tweet to 15%. Section 122 requires universal application of tariffs as the provision is specifically designed to address the short-term emergency – not long-term trade policy – of “large and serious” balance-of-payments deficits or “imminent and significant depreciation of the dollar.” Neither is at this point a clear emergency.

Section 122 has never been used before. Congress enacted it in response to President Richard Nixon’s 1971 use of IEEPA’s predecessor statute, the Trading with the Enemy Act, part of a broad package of measures to yank the dollar off the gold standard. It is highly likely that there will be new lawsuits filed over Trump’s application of it now, particularly as a balance of payments deficit is not likely to constitute a crisis in a system of flexible exchange rates as used in the US and where the US dollar remains the overwhelming primary global reserve currency. The 1974 Trade Act allows such tariffs to be imposed up to 15% for a set period of 150 days, unless Congress agrees to extend it.

While Section 122 tariffs are meant to be globally applied, its use by Trump is already riddled with implementation problems. There is a long list of exceptions or exemptions to imports from Section 122 tariffs. For example, products coming from Canada and Mexico that fall within the terms of the US-Mexico-Canada Agreement (USMCA) are exempt. Items that the US does not produce like coffee are also excluded from the new tariff coverage.

Note that these new Section 122 tariffs do not “stack” on top of any existing Section 232 tariff. In other words, a product made of a metal already subject to a 50% tariff under Section 232 will not attract an additional 15% applied under Section 122.

Global Trade Alert estimates that the Court’s ruling would have cut the US trade-weighted average tariff from 15.4% to 8.3%. However, the application of Section 122 tariffs at 15% will push the overall level back up again very quickly.

Expansion of targets under Sections 232 and 301

During the coming months while Section 122 remains in effect, the US administration has announced plans to dramatically expand the coverage of Section 232 tariffs. These have been levied for national security reasons and currently apply at 50% for goods made with steel, aluminum, and copper. Separate Section 232 tariffs are also in place for autos, trucks, vehicle parts, lumber, and upholstered furniture.

The White House has launched Section 232 investigations into a wider range of additional sectors like semiconductors and electronics, drones, critical minerals, and pharmaceuticals. It is highly likely that these new sectors will receive higher tariffs soon and that the existing Section 232 coverage will again expand to include more so-called “derivative” products.

The US has also promised to start additional Section 301 investigations to address “unfair trade practices” during the coming months. These are handled at the country level and can result in tariffs against all goods from targeted markets.

In short, while the Court decision striking down IEEPA tariffs provides some certainty about what constitutes a national emergency, it does not remove much of the uncertainty that is a hallmark of Trump’s trade policy and tariff threats. The President’s doubling down on his trade policy may in fact result in new risks for American businesses and US trade partners.

What about the napkin trade deals?

Almost every country in the world and even some uninhabited islands were hit with so-called “reciprocal” tariffs on Liberation Day under cover of IEEPA. The original tariffs were calculated using an odd formula that resulted in a Least Developed Country such as Lesotho receiving a 50% tariff rate. “Reciprocal. That means they do it to us, and we do it to them," Trump said on 2 April.

Trump used IEEPA tariffs to also add tariffs against Canada, Mexico, and China, for their alleged roles in fentanyl imports to the US and against some countries for oil purchases from Russia and Iran. The Court’s ruling now invalidates the use of tariffs by the administration for any reason under IEEPA.

Over the past months, some US trade partners have been engaged with the White House to negotiate trade deals in an attempt to water down “reciprocal” tariffs. These include frameworks, interim agreements, and final texts with roughly 20 different trade partners, the last being the one signed with Indonesia on 19 February.

These agreements have been negotiated in the context of Liberation Day tariffs under IEEPA. The very first provision of each agreement outlines the specific “reciprocal” tariff rate for US bilateral trade partners, with rates ranging from 10%-19%.

Now that the Court has invalidated IEEPA tariffs, it is very unclear what happens to these 20-odd bilateral arrangements.

If the “reciprocal” tariff rates reached in these deals stand, these specific trade partners may end up paying higher tariff rates than competitors who did not work with the Trump administration on any such agreement.

There are variations upon variations of the confusion sown first by Trump’s use of IEEPA and then compounded by the current use of Section 122. In cases such as Japan and the European Union, the imposition of Section 122 tariffs appears to run counter to the commitments in their respective bilateral arrangements with the US which put a cap on total tariff rates and clearly indicate that the “reciprocal” rate was tied to IEEPA.

US Trade Representative Jamieson Greer has tried to argue that all these 20-odd trade deals stand as negotiated. The legal authority for the White House to embark on these agreements, none of which have been approved by Congress, was already unclear. The Court’s decision raises additional questions about the durability of these napkin deals, so called because of their flimsy quality.

If foreign governments do not choose to reopen negotiations with the White House, it is likely that foreign firms will file new lawsuits against IEEPA-backed “reciprocal” tariff rates imposed on their goods.

If these foreign governments do pursue reconsideration of these agreements, it may also be that large sections of the arrangements are reopened to examination and not simply the tariff sections. In some US trade partners, domestic constituents had already been raising concerns about the content of various provisions such as economic security rules and treatment of third-country goods. These worries may escalate in the wake of the Court’s decision.

The murky refund process for IEEPA tariffs

What the Court has not done is provide clarity on what happens to IEEPA tariff revenue that has already been collected. This is not a small issue, as the total amount collected under IEEPA is approaching US$170 billion.

The exact process is unclear, but what is likely to happen is that US Customs and Border Protection (CBP) will ultimately process refunds of tariffs paid under IEEPA to the importer of record in their system.

This will be a messy business. Foreign exporters will not receive tariff relief unless the importer opts to share the refund or the contractual obligations of the importer and supplier are clear. Firms that may be eligible for refunds will need to carefully track and trace their paperwork to ensure that all documentation is accurate. The legal and brokerage fees are going to be significant.

Smaller businesses will likely lose out compared to larger ones.

US consumers will not recoup the tariff costs, estimated at US$1,700 per family.

Continued suspension of de minimis

There is another Trump policy that also relied on IEEPA – the suspension of de minimis. De minimis was a provision that allowed goods valued at less than US$800 to enter the US without paying tariffs and with simplified customs documentation.

On 30 July last year, Trump required that all imports to the US of any value be subject to tariffs and full customs declarations. As the justification for removal of de minimis was partially invoked under IEEPA, the White House has also had to update the suspension of de minimis in the wake of the Court’s ruling.

Again, instead of weighing the substance behind the Court’s rebuke, the Trump administration chose to continue suspending de minimis. All goods entering the US will be subject to Section 122 tariffs as well as applicable Section 232 or 301 tariffs.

The muddy path ahead

The global trade community had been hoping for greater clarity in the wake of a Supreme Court ruling. Unfortunately, it isn’t getting any. Trade chaos is set to continue. While the Court clearly rejected the use of IEEPA as a justification for tariffs, Trump remains committed to the invocation of some variation of “national emergency” to entrench a wide-ranging tariff wall. He has repeatedly called tariffs “the most beautiful word in the English language.”

Thus, while IEEPA tariffs have fallen, the administration’s rush to impose substitute trade rules and restrictions will remain. Trade partners will need to think even harder about the reliability of the United States and prepare for new changes to trade patterns in the weeks and months ahead.