Section 122 vs IEEPA Tariffs: What Changed After the Supreme Court Ruling
When the Supreme Court struck down President Trump's IEEPA-based tariffs on February 20, 2026, the administration moved quickly to a backup plan: Section 122 of the Trade Act of 1974. But Section 122 is a fundamentally different legal tool with different limits, different rates, and a hard expiration date. Understanding the differences is essential for any business that imports goods into the United States.
The Core Comparison: IEEPA vs Section 122
The two authorities could hardly be more different in scope and power. Here is how they compare across every dimension that matters to importers:
| Feature | IEEPA Tariffs (Struck Down) | Section 122 Tariffs (Current) |
|---|---|---|
| Legal authority | International Emergency Economic Powers Act (1977) | Trade Act of 1974, Section 122 |
| Trigger requirement | Declared national emergency | "Large and serious" balance-of-payments deficit |
| Maximum tariff rate | No cap (rates reached 145%) | 15% cap by statute |
| Duration | Indefinite (as long as emergency declared) | 150 days maximum |
| Country targeting | Could set different rates per country | Must apply uniformly or by broad category |
| Congressional override | Required joint resolution | Expires automatically without Congressional action |
| Court status | Ruled unconstitutional for tariffs (Feb 2026) | Not yet challenged |
| Current rates applied | N/A (voided) | 10% initially, raised to 15% |
What Was IEEPA and Why Did It Fail
The International Emergency Economic Powers Act was signed into law in 1977 to give the president tools to respond to foreign threats. It was originally designed for financial sanctions -- freezing assets, blocking transactions, and restricting economic dealings with hostile nations. Think of the sanctions on Iran or North Korea: those are classic IEEPA actions.
The Trump administration's novel use of IEEPA to impose import tariffs stretched the law far beyond its original intent. The argument was straightforward: trade deficits constitute a national emergency, and IEEPA authorizes the president to "regulate" any transactions related to that emergency. Therefore, taxing imports was just "regulating" trade transactions.
The Supreme Court rejected this reading. The majority opinion distinguished between regulating transactions (what IEEPA authorizes) and taxing imports (what the Constitution reserves to Congress). Six justices agreed that however broadly you read "regulate," it does not encompass the power to impose duties -- a power the Founders deliberately assigned to the legislative branch.
How Section 122 Works
Section 122 of the Trade Act of 1974 was designed for a specific scenario: when the United States faces a serious balance-of-payments problem. It gives the president limited authority to impose temporary import surcharges as a macroeconomic stabilization tool.
The key constraints are built into the statute:
- Rate cap of 15%: The president cannot impose tariffs above 15% under Section 122, no matter the circumstances
- 150-day limit: Tariffs automatically expire after 150 days unless Congress passes legislation to continue them
- Balance-of-payments justification: The legal basis requires a genuine balance-of-payments emergency, not just a trade deficit
- Broad application: Section 122 was not designed for country-specific targeting like IEEPA was used for
The China Factor
The biggest impact of the shift from IEEPA to Section 122 is on Chinese imports. Under the IEEPA regime, tariffs on Chinese goods reached a staggering 145%. Under Section 122, the maximum surcharge is 15%.
However, Chinese imports are not simply at 15%. Multiple tariff layers still apply:
| Tariff Layer | Rate | Legal Authority | Status |
|---|---|---|---|
| MFN (Normal Trade Relations) rate | Varies by HTS code | Congressional statute | Active |
| Section 301 (List 1-4) | 7.5% - 25% | Trade Act of 1974, Sec. 301 | Active |
| Section 301 (2024 expansion) | 25% - 100% on select goods | Trade Act of 1974, Sec. 301 | Active |
| Section 122 surcharge | 15% | Trade Act of 1974, Sec. 122 | Active (150-day limit) |
| IEEPA tariffs | Was up to 145% | IEEPA (struck down) | Voided |
So a Chinese product that previously faced a combined duty of, say, 170% (25% Section 301 + 145% IEEPA) might now face roughly 40-65% (MFN rate + 25% Section 301 + 15% Section 122). That is still high, but dramatically lower than before.
What Happens When the 150 Days Expire
This is the question every importer should be planning for. When the Section 122 tariffs expire -- likely around late July 2026 -- one of several things will happen:
- Congress passes new tariff legislation. The administration is actively pushing for this. If Congress acts, tariff rates could be set at any level lawmakers agree to, potentially matching or exceeding the old IEEPA rates. This requires passing both chambers and surviving a potential filibuster in the Senate.
- The tariffs simply expire. If Congress fails to act, the Section 122 surcharge disappears. Imports would revert to whatever baseline rates apply (MFN rates plus any Section 301/232 tariffs). For most non-China imports, this would mean a significant duty reduction.
- The administration finds another legal authority. There are other trade statutes the president could potentially invoke, though each has its own limitations. Section 338 of the Tariff Act of 1930, for instance, allows retaliatory tariffs against countries that discriminate against US commerce -- but requires a specific finding of discrimination for each country.
- A negotiated outcome. The expiration deadline creates pressure for trade deals. Some analysts expect the administration to use the ticking clock as leverage to negotiate bilateral agreements with major trading partners.
Practical Implications for Importers
The shift from IEEPA to Section 122 creates a unique planning challenge: you are operating under tariff rates that have a known expiration date but an unknown replacement.
Here is what smart importers are doing:
- Scenario planning: Model your costs under three scenarios -- Section 122 continues, tariffs expire entirely, or Congress passes higher rates
- Accelerating or delaying shipments: Depending on your product and origin country, it may make sense to time shipments around the expiration date
- Filing IEEPA refund claims: Every dollar of IEEPA tariffs you paid is potentially refundable. See our full guide to the Supreme Court ruling and refunds
- Reviewing supply chain decisions: Sourcing changes made to avoid 145% China tariffs may no longer make sense at a 15% surcharge
- Monitoring Congress: The legislative process will determine the long-term tariff landscape. Track trade bills moving through the House Ways and Means Committee and Senate Finance Committee
The Bottom Line
Section 122 is a temporary patch, not a permanent policy. It gives the administration some tariff authority while Congress decides whether to legislate a more permanent framework. For importers, the operative word is temporary. Rates are lower, the legal footing is different, and the clock is ticking.
The 150-day window is both a constraint and an opportunity. Use it to recalculate costs, file refund claims for overpaid IEEPA duties, and prepare contingency plans for whatever comes next.