After the Ruling: Trump’s Tariffs, Section 122, and What Comes Next

The Supreme Court’s ruling

In this commentary Alan Wm. Wolff makes five main points regarding the Supreme Court’s tariff decision and what it leaves unresolved:

1. A welcome but incomplete victory. The ruling strikes down Trump’s IEEPA-based “reciprocal” and “fentanyl” tariffs, but leaves open questions about refunds and what comes next. The Court’s majority did not address the refund issue, and Kavanaugh noted in dissent that costs may already have been passed on to consumers.
2. Separation of powers, not trade policy. The decision is explicitly about constitutional limits — tariff and taxing authority belongs to Congress under Article I — not about whether high tariffs are good or bad policy. The Court found that IEEPA is simply not a tariff statute and that Congress never intended to delegate such sweeping authority to the president.
3. The “major questions” doctrine was central. Chief Justice Roberts applied heightened scrutiny because of the breadth of authority claimed, concluding that there was no clear congressional intent to grant the president such broad tariff powers under IEEPA.
4. Alternative authorities face major constraints. The Trump administration has vowed to pursue other statutes (e.g., Sections 232, 301, 122, 338), but Wolff warns each has significant limitations and would face fresh litigation if used to rebuild a comparable tariff wall.
5. The ball is now in Trump’s court. The next chapter will be Trump’s choice: attempt to use alternative authorities (and face new legal challenges), or seek new legislation from Congress. Wolff cites Justice Gorsuch’s concurring opinion as a pointed message that Congress, not the president, is the proper venue for major tariff decisions.

The Supreme Court’s welcome ruling on Trump’s tariffs
By: Alan Wm. Wolff – Peterson Institute for International Economics

From IEEPA to Section 122: Mapping the new US tariff landscape

This Global Trade Alert report by Johannes Fritz looks at the economic impact from the Section 122 proclamation. His analysis covers over 274,000 trade flows at the exporter × HS 8-digit product level.

Structure of the Section 122 surcharge
The 15% flat surcharge applies to most imports, with three key exceptions:

1. Section 232 products (steel, aluminum, copper, lumber, automobiles) are excluded where 232 tariffs already apply
2. USMCA-compliant goods from Canada and Mexico remain exempt
3. CAFTA-DR (Dominican Republic-Central America Free Trade Agreement) textile and apparel articles entering duty-free are exempt

The surcharge expires on July 24, 2026 unless Congress votes to extend it.

Country-level impacts (Top 20 import sources)
The shift from country-specific IEEPA rates to a flat 15% surcharge creates stark winners and losers:

Biggest winners (largest tariff reductions vs. pre-ruling):

• Brazil: −13.6 pp (26.3% → 21.2%  although still high due to Section 301 on some goods)
• China: −7.1 pp (36.8% → 29.7%)
• India: −5.6 pp (22.3% → 16.7%)
• Vietnam, Thailand, Indonesia also see significant relief

Biggest losers (tariffs rise vs. pre-ruling):

• United Kingdom: +2.1 pp (4.2% → ~10.3%)
• Italy: +1.7 pp (7.0% → ~15.3%)
• Singapore: +1.1 pp (5.0% → ~7.8%)
• Most EU countries (France, Germany, Netherlands) also face higher tariffs than before

Near-neutral: Canada and Mexico remain largely shielded by USMCA, with rates at just 4.7% and 5.2% respectively.

Product/sector-level impacts
Section 122 hits different sectors very unevenly: sectors like toys, games, furniture, and machinery see the largest surcharge-driven increases. Pharmaceuticals, chemicals, and mineral fuels face minimal impact. Iron/steel and automobiles are less affected because Section 232 tariffs already apply and take precedence.

Section 122 in effect: what the US tariff regime looks like now
By: Johannes Fritz – Global Trade Alert

If Section 122 is extended

The effective US tariff rate currently stands at 13.7% — down from 16% before the SCOTUS ruling, briefly falling to 9.1% after IEEPA was struck down, then rising again with Section 122. If Section 122 expires as scheduled after 150 days (July 24, 2026), the rate drops back to 9.1%, the highest since 1947. If extended, it stays elevated.

Price level effects
Under the current regime with Section 122 expiring in July 2026, tariffs raise the overall price level by roughly 0.5–0.6% in the short run. If Section 122 is made permanent, that price impact nearly doubles to 0.8–1.0%. While these percentages may appear modest in isolation, they represent a persistent, broad-based cost increase layered on top of already elevated post-pandemic price levels, and come entirely from a policy choice rather than underlying supply or demand shifts.

Average Household Costs
For a typical American household, the expiration scenario translates to an annual loss of $600–$800 in purchasing power. If Section 122 is extended, that figure rises to $1,000–$1,300 per household per year. These estimates reflect the full pass-through of tariff costs to consumer prices, which the Budget Lab notes is broadly consistent with evidence from the 2018–2019 tariff experience, where nearly all costs were absorbed by US importers and consumers rather than foreign exporters.

Fiscal impact
The SCOTUS ruling effectively wiped out $2.3–2.4 trillion in projected 10-year tariff revenue compared to the pre-ruling baseline. This is a significant fiscal hole for an administration relying on tariff revenues to help offset the cost of extending the 2017 Tax Cuts and Jobs Act, which is estimated to cost $4–5 trillion over the same period. Section 122 at 15% collects only about $170–200 billion per year while active. Since it currently runs only 150 days (roughly 5 months of fiscal year 2026), its contribution in expiration mode is modest. Extension nearly doubles the annual collection rate, making it fiscally significant in the context of the broader budget debate. A critical complication for fiscal projections is the refund liability from the now-invalidated IEEPA tariffs. Yale Budget Lab estimates that roughly $142 billion in IEEPA duties were collected during 2025.

​Global GDP effects
Canada, China, and Mexico would see the largest negative hits to output under either scenario, while European and other free trade agreement partners see slight output gains as trade that previously flowed to the US gets partially redirected toward their own markets and as US import substitution opens competitive space for intra-regional trade.

State of Tariffs: February 21, 2026
By: The Budget Lab at Yale