[ANALYSIS] Trump imposes 15% temporary tariffs under Section 122

OVERVIEW

• Following the Supreme Court’s decision to strike down the administration’s IEEPA-based “Liberation Day” tariffs, President Trump announced a 10% global tariff on Friday under Section 122 of the 1974 Trade Act.
• On Saturday, Trump raised that rate to 15% with immediate effect, the statutory maximum allowed under Section 122.
• Section 122 tariffs are temporary and expire after 150 days (scheduled expiry: 24 July 2026) unless Congress extends them.
• Analysts have noted that the administration could theoretically allow the tariffs to lapse and then immediately declare a new balance-of-payments emergency to restart another 150-day clock.
• Trump over the weekend said that they will use the 150 days that the temporary tariff allows to work on issuing other legally permissible tariffs.
• Section 232 (national security) and existing Section 301 tariffs remain unchanged and intact.
• The White House is pursuing investigations under Section 232 (national security) and Section 301 (unfair trade practices) to implement more permanent tariffs that do not have a built-in expiry date.

WHAT DOES THIS MEAN?

1) Global Tariff Structure

• The US moves from targeted IEEPA tariffs to a flat 15% universal surcharge, simplifying the tariff regime.
• The effective tariff rate remains historically elevated but slightly below pre-ruling peak levels.
• According to Yale Budget Lab estimates, the effective tariff rate rises to ~13.7%, up from 9.1% post-ruling but below ~16% under IEEPA.
• The 15% ceiling caps near-term escalation under Section 122, but does not eliminate escalation risk via other authorities.

2) Winners and Losers

• According to FT data analysis, the new flat structure benefits countries previously facing the heaviest penalties, including China and Brazil.
• Allies such as the UK, EU and Japan face proportionally larger increases under a flat 15% levy versus prior negotiated arrangements.
• EU and Japan had previously negotiated 15% rates. Under the old system, their 15% rate was a "special" lower rate compared to rivals (like China or Brazil) who faced much higher duties. Now that everyone is at 15%, their relative advantage has disappeared.
• The UK is the hardest hit among these allies because it had previously negotiated a 10% rate. Analysts describe this as a major blow to the UK, which had initially been held up as the prime example of a successful "dealmaker" with the administration.
• Goldman Sachs notes that most Asian economies will experience slightly lower US tariffs relative to the pre-ruling IEEPA regime, with China seeing the largest decline.

3) USMCA and Exemptions

• The White House clarified that USMCA-compliant goods remain exempt from the new 15% tariff.
• Civil aircraft parts, certain high-tech products and critical minerals remain exempt.

4) Trade Deals and Negotiations

• US officials insist tariff deal partners should honour prior agreements.
• USTR Greer has sought to separate bilateral tariff agreements from the new universal 15% surcharge.
• Some bilateral deals referencing now-void emergency tariffs (e.g. Switzerland, India) may require redrafting.
• India has postponed trade talks with the US following the Supreme Court ruling.
• The European Parliament’s trade chief proposed freezing ratification of the EU-US trade deal, pending clarification.
• UK officials say they are seeking the “best deal possible” for UK firms.
• Germany’s Chancellor Merz stated Europe will present a coordinated EU position in Washington.

WHAT HAPPENS NEXT?

1) The 150-Day Clock

• Section 122 tariffs expire after 150 days unless Congress acts.
• The administration could allow them to lapse and restart another 150-day period, though this may invite legal challenges.
• More likely scenario: migration toward Section 301 tariffs following ongoing investigations.

2) Section 301 & Section 232 Pathways

• Section 301 allows targeted tariffs for unfair trade practices but requires investigation.
• Section 232 permits sectoral tariffs (steel, autos, semiconductors, pharma) under national security grounds.
• These routes offer durable tariff authority without automatic expiry.

3) Refund Litigation

• Roughly USD 130–180bln in IEEPA tariff revenues may face refund litigation.
• Legal process could take years, creating fiscal and policy uncertainty.

GLOBAL REACTIONS

Europe

• The UK is seeking favourable adjustments to protect domestic firms.
• French Trade Minister Forissier said the EU has tools to retaliate.
• ECB President Lagarde warned the move risks upsetting the prior US-EU “equilibrium” and poses a new economic headwind.
• Germany emphasised that tariff policy is an EU competence and pledged a coordinated response.

Asia

• China’s MOFCOM is assessing the ruling and urged the US to lift unilateral tariffs, arguing they breach trade rules.
• Hong Kong’s Financial Services Secretary called the additional tariff a “fiasco.”
• Japan’s LDP tax chief described the tariff situation as a “real mess.”
• South Korea confirmed that chips are not subject to the new tariffs, and consultations continue favourably.

ANALYST VIEWS

Goldman Sachs

• Effective tariff increase since 2025 now ~9pps (down from >10pps under IEEPA).
• "The policy changes were in line with our expectations, and our estimates of the effects of tariffs on inflation and growth are consequently little changed."
• "Most of the tariff drag on growth occurred in 2025, and most of the tax cut boost will occur in 2026, resulting in a positive swing in the policy impulse that should drive a growth pick-up this year.
• Risks skew slightly higher post-midterms if the administration restores prior tariff levels via Section 301.

ING

• Section 122 is likely “smoke and mirrors” to buy time for Section 301.
• Legal vulnerability remains.
• Trade deals referencing emergency tariffs may need renegotiation.
• Macro outlook unchanged.

MARKET & MACRO IMPLICATIONS

Inflation

Goldman Sachs estimates tariff passthrough has already lifted core PCE by ~0.7pp, with only ~0.1pp additional impact expected through 2026.

• GS says companies are unlikely to reverse prior price increases even if tariff rates modestly fall for certain partners.
• ING expects no change to inflation or growth forecasts based on the current tariff structure.

Growth

• Goldman Sachs forecasts 2.5% GDP growth in 2026 Q4/Q4, with tariff drag largely concentrated in 2025.
• GS says import flows may rebalance: China imports likely rebound modestly; trade rerouting effects unwind.
• Net GDP impact expected to be limited in the near term.

Policy Uncertainty

• Section 122 is legally untested and rooted in balance-of-payments language that may be difficult to defend in court.
• Analysts widely view Section 122 as a bridge mechanism, buying time for Section 301 actions.
• Trade policy volatility remains structurally elevated.