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- How Section 122 Interacts With Tariffs That Survived the Court’s Ruling
- The Four-Day Gap and the Claims Still Pending
- Where the 15% Lands: Product by Product
- The Timeline From Border Tariff to Retail Price Increase
- The Household Math
- The 150-Day Clock and What Happens After It Runs Out
- No Law Requires Retailers to Disclose Tariff-Driven Price Increases
- Immediate Steps for Importers Under Section 122
Four days after the Supreme Court struck down the administration’s emergency tariffs, a new 15% surcharge on most U.S. Imports was already in effect. Not a revised version of what the Court had invalidated. A different set of levies, under a different law, with a different end date. The administration had a backup plan ready within hours of the ruling.
The new authority is Section 122 of the Trade Act of 1974, a provision that has existed for half a century without ever being invoked by any president prior to February 2026. It lets the President impose import surcharges up to 15% for up to 150 days. The stated purpose is to address “large and serious United States balance-of-payments deficits.” The administration initially imposed it at 10% on February 24, 2026, subsequently raising it to the statutory maximum of 15%, on almost everything, expiring July 24, 2026.
For consumers, the practical question is simple: what does this cost me? The answer is more complicated than the headline rate suggests. The tariff does not apply evenly, and it stacks in complex ways with other tariffs already in place. The timing of price increases also depends on which products you buy and where they come from.
How Section 122 Interacts With Tariffs That Survived the Court’s Ruling
The Supreme Court’s decision in Learning Resources, Inc. V. Trump struck down tariffs imposed under the International Emergency Economic Powers Act. What it did not touch were tariffs imposed under two other laws that remain intact: Section 232 of the Trade Expansion Act of 1962 (national security tariffs) and Section 301 of the Trade Act of 1974 (tariffs responding to unfair trade practices). The new Section 122 surcharge sits on top of this existing setup. Except when it doesn’t.
The February 20 proclamation clearly excludes goods already subject to Section 232 tariffs from the new surcharge. Steel, aluminum, automobiles, auto parts, certain copper derivatives, timber, lumber, semiconductors: none of these face the additional surcharge, though semiconductors may be exempt under a separate ‘certain electronics’ category rather than Section 232 coverage. A good already paying a 50% Section 232 tariff on steel does not also pay 15% on top of it.
But here’s the part that confuses people. The non-stacking provision prevents Section 232 and Section 122 tariffs from stacking on the same imported good, establishing a hierarchy where only one regime applies. A smart refrigerator containing a logic circuit: the semiconductor inside it may have paid a 25% Section 232 duty at import. The refrigerator itself, as a finished consumer product, faces the full 15% Section 122 surcharge on its whole value. The exemption applies only to that specific part, not to the finished product it ends up in.
The result is that actual tariff rates now differ sharply by country of origin and product category.
A television manufactured in Mexico or Canada and qualifying for USMCA treatment faces zero Section 122 tariff. That same television manufactured in Vietnam faces the full 15%, plus any existing tariffs already in place. Consumer electronics from China face 15% Section 122 plus Section 301 tariffs that vary by product; while many electronics fall in the 7.5%–25% range, Section 301 rates on Chinese goods overall reach as high as 100%.
The Four-Day Gap and the Claims Still Pending
The Supreme Court struck down IEEPA tariffs on February 20. The new surcharge took effect four days later. That window, February 20 through 24, allowed goods to be imported without any emergency tariff and before Section 122 applied.
In theory, this created a reason to import as much as possible during those four days. In practice, U.S. Customs and Border Protection issued guidance stating that IEEPA duties would cease collection for goods entered on or after 12:00 a.m. Eastern on February 24.
It gave no clear guidance on how goods in transit during the gap would be treated. No special entry code. No formal procedure for gap-period goods. One official customs bulletin, issued February 22, and then silence on the operational details.
For goods shipped by air from nearby countries, getting the gap-period rate was theoretically possible. For ocean freight from Asia, it was not. Most goods that had begun transit before the 24th did not arrive at U.S. Ports until after that date. At that point, they faced the Section 122 rate.
Some importers attempted to claim gap-period treatment for goods that physically arrived after February 24. The outcome of those claims is still being decided at CBP and the Court of International Trade.
One chemical products importer, quoted in trade publication Supply Chain Dive, described the decision this way: “We had shipping containers on the water every day. The question was whether to pay the Section 122 rate or spend three weeks of air freight cost to maybe capture a lower rate window that was already almost closed.” Most importers chose to wait. The gap period thus became a planning moment in which companies had to act on incomplete information,
Where the 15% Lands: Product by Product
Not every category faces the same burden. Some are fully exempt. Others face the full 15% on top of existing duties. The differences are large enough to affect both supply-chain planning and household budgets.
Apparel and footwear from Asia face the full 15% Section 122 surcharge, plus certain tariffs already in place. Certain duty-free textiles and apparel from CAFTA-DR countries (Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua) are exempted from Section 122 for those specific goods categories only — not all goods from these countries, which creates an incentive to shift sourcing.
But those countries have limited manufacturing capacity, and moving manufacturing to nearby Mexico within 150 days is not possible for most apparel suppliers. USMCA has a strict origin rule, called “yarn-forward.” This rule requires the yarn used to make the fabric to originate in North America, not just the final garment. You cannot meet that requirement by moving a finishing operation to Monterrey while still buying fabric from Guangzhou. So most apparel and footwear faces the effective 15% surcharge with few near-term options to reduce it.
Consumer electronics from Asia face the full 15%. Electronics from Canada and Mexico qualifying for USMCA origin are fully exempt. The treatment of products made from a mix of parts is more complex. In these products, a semiconductor inside the product may be exempt while the rest of the device is not. That question is still not fully resolved. Further CBP guidance is pending on how to calculate the semiconductor’s share of total device value.
Automobiles and auto parts already facing Section 232 tariffs of 25% do not also face Section 122. But auto parts that do not contain steel or aluminum, like electronic components, plastic trim, and rubber seals, may face the full 15% Section 122 surcharge if they do not qualify for USMCA origin. The result is a tariff structure within a single automotive supply chain where some components face 25%, some face 15%, and some face both. The outcome depends on material content and origin records.
Pharmaceuticals are explicitly exempted from Section 122. The White House proclamation uses the phrase “because of the needs of the United States economy” as a general justification for all product exemptions. The administration has separately cited supply chain resilience and prior commitments to domestic pharmaceutical investment, consistent with executive orders encouraging onshoring of drug manufacturing.
Critics, however, argue the exemption reflects political calculation as much as policy logic, given how sensitive drug prices are to hospital systems and the broader public. Critical minerals and energy products are also exempted, along with certain select agricultural commodities, though available sources do not specify which agricultural products qualify. Furniture, toys, and most household goods from Asia face the full 15%. Their ability to source from USMCA-compliant producers quickly enough to matter within the 150-day window is limited.
The Timeline From Border Tariff to Retail Price Increase
A tariff imposed at the border becomes an import cost that day. It does not become a retail price increase that day.
The best evidence comes from the 2018-2019 tariff period. Research by economists at the Federal Reserve Bank of New York, Princeton, and Yale found that tariff costs were passed through to importer prices almost immediately. Within two months, 86 to 94 percent of the tariff was built into import values. The path from importer price to consumer shelf price was slower and more varied. Washing machines, which faced a tiered tariff structure — 20% on the first 1.2 million imported units and 50% on all imports above that threshold — saw prices increase quickly and almost completely. Other categories subject to less visible tariffs increased much more slowly, and by smaller amounts than the tariff rate would suggest.
Retailers often have inventory purchased before tariff announcements, which delays price increases by weeks or months as they sell through existing stock at old wholesale costs. Supplier contracts often include price-adjustment clauses but not automatic tariff pass-through, requiring new negotiations.
And competition matters: if a retailer’s competitors have cheaper pre-tariff inventory, the retailer cannot simply raise prices without losing customers. The result is a period where businesses absorb the cost themselves, squeezing their own profits, while prices rise slowly.
Section 122’s 150-day expiration creates a specific situation that did not exist in 2018. Many retailers and manufacturers appear to be absorbing costs in the short term rather than raising prices much. They are betting that the tariff will expire in July or that Congress will not extend it. Earnings call transcripts and internal communications leaked to media in the days after Section 122 took effect suggest this approach is widespread. Retailers have been careful not to admit publicly that they are absorbing costs rather than passing them through.
Drawing from St. Louis Fed research on the 2018 tariff episode: for categories with high pass-through rates, like automobiles and household appliances, retail prices began rising within one to two months of tariff implementation. Pass-through rate refers to the rate at which tariff costs are passed on to consumers as higher prices. For electronics and apparel, pass-through reached near 100 percent of the tariff cost to importer prices in the first six months, consistent with research showing substantially higher pass-through than earlier estimates suggested. Section 122 began February 24. By late April or early May 2026, most retail price increases should be visible across major categories. Some categories will show little movement, however, if retailers continue absorbing costs through July.
The Household Math
Using data on import values by category and applying pass-through assumptions in line with 2018-2019 evidence, economists have produced estimates that reveal how tariff costs are spread across income groups.
The Yale Budget Lab estimated that all tariffs in effect as of February 2026, including Section 122, will increase prices by approximately 0.6% in the short run, before consumers change their buying habits. That translates to between $600 and $800 per household per year in 2025 dollars on average. But averages hide what matters most here.
The bottom 10% of households by income bear tariff costs equivalent to 1.1% of their annual income. The top 20% bear costs equivalent to 0.4% of annual income. For a household earning $30,000 per year, that is roughly $330 in tariff costs. For a household earning $150,000, it is about $600 in absolute dollars, but less than half the income share.
Note that $150,000 is used here as an illustrative income within the top quintile, not the average income of that group; a household at the top quintile’s actual average income would pay more in absolute dollars while still bearing a smaller income share. The regressive nature of broad-based import tariffs (meaning the burden falls harder on lower-income households) is well-established in economics research and clearly visible here. Lower-income households spend a larger share of income on exactly the categories facing the highest tariff costs: apparel, footwear, electronics, and furniture.
The household that buys its clothes at Walmart and its furniture at IKEA pays a larger share of its income in tariff costs than the household that buys its clothes at Nordstrom and its furniture at a domestic craftsman. That is an expected result of taxing imports that lower-income households rely on more heavily.
Tariff supporters counter that this burden on spending must be weighed against the benefit to employment. Manufacturing jobs created or kept by tariff-driven reshoring tend to employ workers without college degrees. Wage gains in tradeable-goods sectors could offset the higher prices lower-income households pay.
Whether that tradeoff happens depends on the size and speed of domestic manufacturing investment. The 2018-2019 tariff episode, the closest available example, produced little evidence of broad wage gains large enough to offset the documented spending cost increases for lower-income households.
The 150-Day Clock and What Happens After It Runs Out
The Section 122 authority expires July 24, 2026, unless Congress votes to extend it. The administration has indicated it does not intend to let the levies lapse. Instead, it plans to use the 150-day window as a bridge to longer-lasting authorities, specifically by starting or expanding investigations under Section 301 and Section 232, which carry no 150-day limit.
Those investigations require procedural steps: public comment periods, hearings, internal review, agency reports to the President. The Section 122 window provides enough time to complete those required steps while keeping tariff revenues and using tariffs in trade negotiations. Trade attorneys at Thompson Hine describe Section 122 as functioning less like a permanent trade policy. In their view, it is more like a placeholder while the administration builds the legal framework needed to keep tariffs in place long-term. That framework consists of specific laws and investigations under Section 301 and Section 232.
But Section 301 and Section 232 investigations are subject to court review. The Supreme Court’s reasoning in Learning Resources held that tariffs are a form of taxation requiring clear congressional authorization. That reasoning could in theory apply to those authorities as well. Legal challenges are already being prepared. Whether Section 232 and Section 301 survive that review is genuinely uncertain. Legal experts disagree, and the Court has not addressed those authorities directly.
For business planning, July 24 is the key factor. If Congress extends Section 122, or if Section 301 and Section 232 investigations are completed and result in similar tariffs by late July, the tariff environment will be largely continuous. If tariffs lapse or are sharply reduced, companies that invested in sourcing changes or stockpiled inventory in advance will face sudden margin relief, or losses if they bet too heavily on tariffs continuing. Foley and Lardner’s trade practice group advises clients to run the numbers on three scenarios: full continuation, partial continuation through the legal authorities that would replace Section 122 after it expires, and lapse. Most companies are not doing all three. Most are betting on continuation.
No Law Requires Retailers to Disclose Tariff-Driven Price Increases
There is no requirement, under FTC rules or state consumer protection laws, that retailers reveal when a price increase is tariff-driven rather than due to rising input costs, supplier profit increases, or other factors. When a $50 pair of shoes increases to $57.50, the consumer does not know whether the increase reflects a 15% tariff, higher labor costs, higher retail rent, or a retailer taking the opportunity to improve margins. The consumer sees $57.50.
The FTC’s Rule on Unfair or Deceptive Fees requires sellers to disclose all mandatory charges upfront and prominently, but includes an exemption for “taxes or other government charges.” Tariffs, while economically equivalent to a sales tax paid by consumers, are collected at the border and may not qualify as “government charges” in the regulatory sense. The rule does not require tariff disclosure. No other rule does either.
This lack of transparency compounds with the rapid authority-switching. Under IEEPA, consumers who noticed price changes might link them to emergency tariffs related to specific crises. Now the authority has shifted to Section 122, framed around balance-of-payments deficits. That is a technical economic concept most people have never encountered. If the legal basis shifts again to Section 301 or Section 232 on July 24, the framing changes once more. Consumers end up bearing costs with no clear information about their source, which limits the political accountability that price transparency would otherwise allow.
“Consumers deserve to know why prices are going up, and they deserve information about whether the increases are policy-driven or market-driven,” said Tiffani Fontaine, a consumer protection attorney at the Consumer Federation of America, in a recent statement. No legal tool currently exists to require such disclosure. The administration has shown no interest in creating one.
Immediate Steps for Importers Under Section 122
The immediate practical guidance is clear. Audit your product classifications under the Harmonized Tariff Schedule (HTS), the official system that determines which tariff rate applies to each type of good, to confirm which duties apply to which goods. Misclassification can result in back-payments, penalties, or loss of lower tariff rates available under trade agreements like USMCA.
Verify your USMCA eligibility if sourcing from Canada or Mexico. One U.S. Automotive supplier discovered after Section 122 took effect that approximately 40% of its Mexican-sourced inventory already qualified for lower tariff rates available under trade agreements like USMCA but had never been documented as such. Fixing the paperwork, not the supply chain, provided immediate savings.
For companies considering nearshoring to Mexico, the realistic timeline is 12 to 24 months, according to NAPS International, a consulting firm focused on Mexico manufacturing operations. That includes site selection, facility setup, workforce recruitment and training, vetting and approving new suppliers, setting up the specialized equipment needed to make the products, and initial production runs to check quality. The 150-day Section 122 window does not provide that time. Companies can begin the process now, but they will not see tariff relief from nearshoring before July 24. The window is a planning period, not an action period.
David Hubbard, a trade attorney at K&L Gates, put it plainly in interviews with trade publications: “You can’t flip a switch. You need six to 18 months of planning, validation of suppliers, negotiation of contracts, and small initial production runs to test quality before you commit volume to a new region.”
The more pressing question for most importers is not where to source in 2027 but how to price in April and May 2026, when the pass-through from duty increases to retail prices becomes visible in data and in shopping carts. The companies that have planned for their July 24 scenarios, knowing what they will do if Section 122 expires versus if it continues, are better positioned than those waiting for certainty that is not coming.
The legal challenges to Section 301 and Section 232 authorities are being prepared by the same trade groups that successfully challenged IEEPA tariffs.
If those challenges succeed, tariffs revert to pre-2025 levels without new congressional authorization. That outcome would provide meaningful relief to import-dependent households and businesses. If they fail, Section 301 and Section 232 authorities would sustain a tariff environment broadly similar to what Section 122 is currently producing. Those authorities carry no expiration date, have already survived decades of court review, and require no legislative action to maintain.
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