The US trade landscape shifted dramatically on 20 February 2026 when the Supreme Court struck down tariffs imposed under the International Emergency Economic Powers Act (IEEPA). For freight forwarders managing complex global routes, this ruling marks a fundamental change in how Washington wields trade policy-and creates immediate uncertainty across cargo flows worldwide.
Within days, the White House responded with Section 122 of the Trade Act of 1974, imposing a flat surcharge across most imports. The rate jumped from 10 percent to 15 percent on 22 February, taking effect on 24 February for 150 days unless Congress extends it.
The Core Shift: From Executive Flexibility to Legal Limits
The Supreme Court ruled that IEEPA does not authorise the president to impose tariffs. This removes the administration’s ability to levy duties at any rate, on any country, over a weekend. That mechanism had become President Trump’s primary tool for foreign policy pressure.
“He can no longer credibly threaten to impose tariffs at the stroke of a pen on a country because they’re not doing what he wants them to do.”
– Edward B. Fishman, Council on Foreign Relations
Brad W. Setser, also from the Council on Foreign Relations, noted that IEEPA had become a catch-all mechanism for instant tariff. Now the administration must rely on alternative authorities-each with specific limitations, time requirements, and legal constraints.
Section 122: A Temporary Fix With Uneven Impact
The Section 122 surcharge is effective from 24 February through 24 July 2026. At 15 percent, it replaces the previous IEEPA regime but excludes several categories:
- Section 232 tariffs on steel, aluminium, copper, lumber and automobiles remain in place
- Articles entering duty-free under USMCA stay exempt
- CAFTA-DR textile and apparel products entering duty-free are excluded
- Approximately 1,100 product codes listed under Annex II are exempt
Analysis of 274,000-plus trade flows at the exporter and HS 8-digit level reveals how the flat surcharge reshapes competitive dynamics. The trade-weighted average US tariff rate now sits at 13.2 percent under Section 122 at 15 percent, down from 15.3 percent before the ruling.
Winners and Losers by Country
Countries that faced high IEEPA rates see substantial relief. Brazil sees a tariff reduction of -13.6 percentage points. China drops -7.1 percentage points, with its effective rate falling from roughly 30 percent to around 20 percent. India sees a -5.6 percentage point reduction.
Conversely, countries with previously low tariffs now face higher rates. The United Kingdom sees an increase of +2.1 percentage points. Italy rises +1.7 percentage points, and Singapore climbs +1.1 percentage points. The flat surcharge compresses country-specific variation, narrowing relative tariff advantages.
What Section 232 Means for Your Cargo
The Supreme Court decision did not affect Section 232 tariffs, which remain a significant part of the US tariff regime. Auto-exporting nations like Korea and Japan still face substantial duties. Auto 232 tariffs were set at 25 percent for many countries, negotiated down to 15 percent for some and 10 percent for the UK.
Products subject to Section 232 coverage-steel, aluminium, copper, lumber and automobiles-are excluded from the Section 122 surcharge. This creates parallel regimes that forwarders must track separately when quoting multi-commodity shipments.
The Refund Question: Unresolved and Expensive
The Supreme Court did not address whether tariffs already collected under IEEPA must be refunded. President Trump expressed frustration during a press conference, suggesting years of litigation could follow before any refunds materialise.
“President Trump was very vocally unhappy about [the lack of mention of refunds] during his press conference today. And he, the president, suggested that there could be years of litigation for refunds to come through.”
– Rebecca Patterson, Council on Foreign Relations
For freight forwarders managing client accounts, this creates immediate uncertainty. Shippers who paid elevated duties under IEEPA may pursue refunds, but the timeline and likelihood remain unclear. This ambiguity complicates cost forecasting and margin planning on shipments already in transit or recently cleared.
Trade Agreement Reviews: USMCA and Beyond
The USMCA review is expected to be completed by 1 July. The agreement includes a provision allowing it to sunset after sixteen years if not formally renewed. Rebecca Patterson noted the deep integration of the three North American economies makes it “almost hard to believe that anyone would let this deal lapse.”
Articles entering duty-free under USMCA remain exempt from the Section 122 surcharge. This makes door-to-door (D2D) shipments from Canada and Mexico relatively more competitive compared to other origins, particularly for time-sensitive cargo.
Foreign Investment and Policy
Countries have responded with investment commitments to secure favourable treatment. Japan announced $36 billion in investment across three US companies in the first tranche. Such deals reflect how nations are adapting to a policy environment where tariff threats, though legally constrained, still shape negotiating dynamics.
Edward B. Fishman noted that this represents a sea change for how President Trump conducts foreign policy. Without instant tariff, the administration may increasingly turn to sanctions, export controls, or other tools to achieve foreign policy objectives.
What Freight Forwarders Should Do Now
Quote complex routes with multiple scenarios. The 150-day window for Section 122 expires 24 July unless Congress extends it. Build flexibility into pricing for clients with exposure to affected lanes.
Track Section 232 and Section 301 investigations. The administration will likely initiate multiple probes to resurrect tariffs under different authorities. Each investigation follows specific timelines and legal processes.
Monitor USMCA and CAFTA-DR exemptions. These remain in place and offer competitive advantages for routing decisions, particularly for D2D services to and from North America.
Prepare for continued volatility. The Supreme Court ruling limits executive flexibility but does not eliminate tariff policy shifts. Forwarders who quote fast, book direct and maintain real-time visibility will win more cargo in this environment.
The tariff landscape just became more complex. But complexity creates opportunity for forwarders who move first and fast. Stay informed, stay flexible and keep your clients updated in real time.
