Major shift in U.S. trade policy: from IEEPA to Section 122 tariffs
Date of publication: February 23, 2026
Supreme Court ruling triggers rapid policy pivot
On February 20, 2026, the U.S. trade landscape underwent a dramatic transformation following a Supreme Court decision striking down tariffs imposed under the International Emergency Economic Powers Act (IEEPA). Within hours of the ruling, President Trump issued new executive actions imposing tariffs under Section 122 of the Trade Act of 1974, fundamentally reshaping the tariff regime while maintaining significant trade restrictions.
End of IEEPA tariffs
The Executive Order ending certain tariff actions terminated the additional ad valorem duties imposed under IEEPA, including reciprocal tariffs, fentanyl-related tariffs, Russian oil sanction tariffs, Brazilian tariffs, and other country-specific measures. The order directs agencies to cease collection of these duties "as soon as practicable," though the process and timeline for refunds remain unclear.
Critically, the Executive Order clarifies that while IEEPA tariffs are ending, all national emergencies declared in the underlying executive orders remain in effect, and any non-tariff actions taken under those orders continue unchanged.
New Section 122 tariff structure
Baseline rate and duration
The new Section 122 Proclamation imposes a 10% ad valorem import duty on articles imported into the United States for a period of 150 days,
effective February 24, 2026, at 12:01 a.m. EST
. The rate was later increased to 15% ad valorem via a Truth Social Post by President Trump, although no legal text to confirm this has been published at the time of this article being drafted. The Proclamation invokes authority under section 122 of the Trade Act of 1974, which empowers the President to address certain fundamental international payment problems through surcharges and other special import restrictions. Subsequently, U.S. Customs and Border Protection (CBP) issued CSMS 67434313 ending the collection of IEEPA duties as of 12:00 a.m. EST on February 24, 2026.This represents a significant shift from the IEEPA regime's country-specific rates to a uniform baseline tariff. Unlike IEEPA, Section 122 explicitly limits both the rate (maximum 15% ad valorem) and duration (150 days without congressional extension).
Justification: balance of payments
The administration bases the Section 122 tariffs on alleged "fundamental international payment problems," specifically citing:
- The annual U.S. goods trade deficit exploded by over 40% during the Biden Administration, reaching $1.2 trillion in 2024.
- In 2024, for the first time in more than 60 years, the United States made less on the capital and labor it deployed abroad than foreigners made on the capital and labor they deployed in the United States.
- In 2024, the United States maintained a current account deficit of -4.0% of gross domestic product (GDP), almost double the current account deficit of approximately -2.0% that prevailed between 2013 and 2019.
- At the end of 2024, the U.S. net international investment position was $26 trillion, which was 89% of U.S. GDP
Comprehensive exemptions
Product exemptions
The surcharge does not apply to:
- Certain critical minerals
- Metals used in currency and bullion
- Energy and energy products
- Natural resources and fertilizers unavailable or insufficient in the U.S.
- Certain agricultural products (beef, tomatoes, oranges)
- Pharmaceuticals and pharmaceutical ingredients
- Certain electronics
- Passenger vehicles, certain trucks, buses, and related parts
- Certain aerospace products
- Informational materials, donations, and accompanied baggage
Country and agreement-based exemptions
All articles and parts of articles that currently are or later become subject to section 232 actions are exempt. Additionally:
- USMCA compliant goods of Canada and Mexico are exempt.
- Textiles and apparel articles that enter duty-free as a good of Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, or Nicaragua under the Dominican Republic-Central America Free Trade Agreement (CAFTA-DR) are exempt.
Goods in transit
Goods loaded onto vessels before 12:01 a.m. EST on February 24, 2026, and entered for consumption before 12:01 a.m. EST on February 28, 2026, are also exempt.
Interaction with existing tariffs
The tariff imposed in the Section 122 proclamation is in addition to any other duties, taxes, fees, exactions, and charges applicable to such products, as with the IEEPA tariffs (MFN duties, antidumping/countervailing, Section 301, etc.). However, the surcharge imposed in this proclamation shall not apply in addition to tariffs imposed under section 232. For products where Section 232 tariffs apply only to part of the value, the Section 122 surcharge applies only to the portion not covered by Section 232.
This means Section 232 tariffs on steel, aluminum, copper, lumber, and automobiles remain in place and take precedence over the new 10% surcharge.
De minimis suspension continues
In a separate Executive Order, President Trump also reaffirmed and continued the suspension of duty-free de minimis treatment for low-value shipments, including goods shipped through the international postal system, which will also be subject to the temporary import duty imposed under section 122.
Future trade actions
In addition to the announcements on February 20, 2026, the President has directed the Office of the United States Trade Representative (USTR) to use its Section 301 authority to investigate certain unreasonable and discriminatory acts, policies, and practices that burden or restrict U.S. commerce.
“The Supreme Court's disappointing decision today will not deter the President's effort to reshape the long-distorted global trading system”, according to the White House fact sheet. The administration signals that while legal authorities may shift, the overall policy direction—reshoring domestic production through tariffs and bilateral deals—will continue.
There are a number of additional legal channels that the President can pursue to implement tariffs to replace IEEPA. The approaches and timelines vary as noted in the chart below.
Authority | Target | Comments |
|---|---|---|
International Emergency Economic Powers Act - (IEEPA) | Broad |
|
Trade Act of 1974 - Section 122 | Broad |
|
Trade Act of 1974 - Section 301 | Country or Barrier |
|
Trade Expansion Act - Section 232 | Sectoral |
|
Tariff Act of 1930 - Section 338 | Country |
|
Although we cannot be certain of future actions, the use of Section 301 and Section 232 would add longer lead times to implementation, the opportunity for comment before finalized, and a bit more predictability than what was experienced under IEEPA.
Implementation and administration
The surcharge imposed in the proclamation shall be treated as a regular customs duty. Use of foreign trade zones (FTZs) requires goods subject to the Section 122 tariffs to be entered in "privileged foreign status" (unless eligible for admission in "domestic status").
The U.S. Trade Representative, in consultation with the International Trade Commission Chair and CBP Commissioner, has authority to make additional HTSUS modifications necessary to effectuate the proclamation.
Key implications for trade professionals
- Temporary but Renewable: The 150-day duration creates planning uncertainty, as the administration could theoretically allow expiration and restart the clock with a new declaration. At this time, without further extension, the Section 122 tariffs would expire on July 24, 2026.
- Legal Challenges Expected: The Section 122 authority has never been used before and faces questions about whether current economic conditions meet the statutory requirement of "fundamental international payment problems.
- Refund Process Unclear: Despite the Executive Order ending IEEPA tariffs, no clear administrative process exists for refunds. Court proceedings through the Court of International Trade (CIT) appear necessary for importers seeking recovery of previously paid duties. Possible administrative refund procedures with CBP have not yet been communicated and ongoing monitoring will be necessary.
- Bilateral Agreements Continue: The United States will continue to honor its legally binding Agreements on Reciprocal Trade per the USTR, suggesting that negotiated deals remain viable pathways for relief. The long-term future of the previously negotiated agreements is uncertain and will require companies to keep track of possible changes.
- Section 232 Priority: Products already subject to Section 232 tariffs maintain that coverage without additional Section 122 duties, creating a hierarchy of tariff authorities.
- Section 301 Investigations Coming: The directive to USTR signals additional country or practice-specific investigations that could lead to new tariffs with more durable legal foundations.
Conclusion
The transition from IEEPA to Section 122 represents a significant recalibration of U.S. tariff policy, replacing country-specific rates with a uniform 10% baseline while maintaining extensive exemptions. The 150-day limitation introduces both certainty and uncertainty, a defined endpoint but also the potential for renewal. Trade professionals should monitor developments closely, particularly regarding refund procedures, legal challenges to Section 122 authority, potential congressional action on extension, and forthcoming Section 301 and Section 232 investigations. The administration's commitment to continued tariff use as a policy tool, regardless of legal authority shifts, suggests that trade volatility will persist through 2026.
ONESOURCE Global Trade provides a comprehensive suite of tools designed to help companies effectively manage the complexities of the current tariff environment. With these capabilities, ONESOURCE Global Trade equips companies to navigate ongoing changes, maintain compliance, and maximize refund opportunities during this period of uncertainty.
For more information on how ONESOURCE Global Trade solutions can assist you in managing supply chain risk, tariff challenges and regulatory compliance, contact your Account Manager or Client Success Manager.
important
This analysis is based on official White House documents dated February 20, 2026. Trade professionals should consult with customs counsel regarding specific product classifications and company circumstances, particularly regarding refund claims for IEEPA tariffs and compliance with the new Section 122 regime.