Key Insights:
- IEEPA invalidated: SCOTUS struck down the Trump administration’s use of IEEPA to enact tariffs, invalidating all of last year’s country-specific and fentanyl-related duties. The ruling keeps Section 232 sectoral tariffs and Section 301 tariffs on China unaffected and the US suspension of de minimis also remains intact.
- 15% blanket tariff instead: The White House responded by invoking Section 122 of the Trade Act of 1974 – framing the situation as a balance of payments emergency – to impose a 15% blanket tariff on all imports effective February 24th, and valid until the end of July. Trump also stated that the White House will replace the IEEPA tariffs before the deadline via other trade laws like Section 301 While Section 301 can be used for country-specific tariffs, the process can take months from start to finish.
- Only moderate tariff change for most countries: The shift to a global 15% tariff mostly preserves the IEEPA trade barriers: Yale’s Budget Lab estimates the change reduces the overall effective US tariff rate by only two percentage points, with impacts varying by country – a five percentage point reduction for China and Vietnam, no change for the EU, a 5% increase for the UK, and the most significant reduction for Brazil (down from 40%); Overall effective tariffs on China remain around 40% due to pre-existing Section 301 duties.
- Loss of IEEPA changes velocity of Trump threats:The biggest geopolitical impact may be Trump’s loss of IEEPA’s speed: Trump has repeatedly used the IEEPA-based threat of immediate tariffs for leverage across a range of geopolitical issues – most recently Greenland and Iran. Without it, the speed with which Trump’s threats have shifted trade and impacted logistics markets is likely to slow considerably compared to 2025.
- A tariff off-ramp? The White House’s use of the ruling as a pretext to reduce tariffs in the face of growing political pressure remains possible but unlikely in the near term. But reinstating IEEPA-level tariffs via Section 301 by the end of July would mean doing so just before midterm elections, and early signs of Republican opposition to tariffs and cost-of-living pressures could influence the administration’s approach.
- Frontloading again? Significantly lower effective tariff rates are likely to spur shipments out of places like Brazil. And some importers out of China and Vietnam may be enticed by the 5% dip in tariffs to increase orders too. But the overall modest reductions and high uncertainty may limit the surge compared to last year’s frontloading waves, with any pickup likely starting in early March as manufacturing resumes post-Lunar New Year.
- Refunds for IEEPA paid? Shippers are being encouraged to act quickly to preserve eligibility for potential IEEPA tariff refunds, though courts have yet to rule on the issue and the process is expected to be neither simple nor automatic; as with much of the past year, the net result of this ruling is more uncertainty and potential volatility for freight markets rather than the stability businesses need for effective planning.
The response
The White House responded quickly, reframing the emergencies identified in the IEEPA tariffs as a balance of payments problem. This shift enabled the president to sign an executive order based on Section 122 of the Trade Act of 1974 to apply 10% duties on all arriving imports. On Saturday, Trump announced on social media that the tariff – which will go into effect on February 24th – would instead be set at 15%.
The ruling does not invalidate and does not stack on top of the Section 232 sectoral tariffs already in place. It also leaves Section 301 tariffs – used in the first Trump administration for most of the tariffs on China – intact. The executive order also keeps in place the various tariff exceptions that the White House has rolled out in the past year.
Though Section 122 explicitly empowers the president to introduce tariffs, it has never been used to do so before. The White House’s claim of a balance of payments emergency – the law was introduced while the US was still on the gold standard – could also face legal challenges.
Implications for trade
15% tariffs more or less keeps IEEPA in tact
Though there are outliers, overall the shift from country-specific tariffs to a blanket 15% on all imports to the US does not drastically reduce or increase tariffs on goods from most of the US’s largest trading partners. The Budget Lab at Yale estimates that the change reduces the overall effective US tariff rate by only two percentage points.
Most of the US trade agreements over the past year have set tariffs somewhere between 10% and 20%. So Section 122 represents, for example, a five percentage point tariff increase for some goods out of the UK, no change for the EU, a 3% reduction for India, and a 5% discount for exports from China and Vietnam. The estimated overall effective tariff rates per country can be slightly higher or lower than these simple calculations though, and overall effective tariffs on China remain in the 40% range due to the pre-existing 301 tariffs.
Goods from Brazil will see the most significant reduction from its 40% IEEPA rate, and tariffs on non-USMCA goods will drop to 15% from 35% for Canada and 25% for Mexico. All in all though, the shift to a global 15% tariff somewhat flattens the tariff landscape but mostly keeps the existing barriers in place.
But no IEEPA may mean less chaotic rate of US policy change
Leadership in other countries, many with some form of US trade agreement, are so far being cautious in their response. And while the EU will hold an emergency meeting to decide how to proceed, others seem to indicate they will stick to the commitments in the deals despite the IEEPA drama.
This setback reduces Trump’s leverage just ahead of his end of March meeting with China’s Xi, and not just because it undermines his authority and the popularity of his policies.
The White House chose to rely on IEEPA this time around because of its speed: Trump threatened tariffs again and again over the past year – including most recently on European countries because of the Greenland issue, and as a method to isolate Iran – and those threats were taken seriously because they they could be introduced almost immediately via IEEPA.
The biggest change to geopolitics, and the biggest blow to Trump’s power from the SCOTUS ruling then, is that the president can no longer use the threat of immediate tariffs as leverage across a wide range of issues. From a trade perspective, unlike in 2025, the rate of change in US trade policy is likely to slow significantly.
Tariff off-ramp?
There had been some speculation that the White House would use a Supreme Court loss as an off-ramp from tariffs in the face of rising cost of living concerns. So far, it doesn’t look like this will be the case. But it is early days, and reinstating IEEPA tariffs via Section 301 by the end of July would mean re-introducing tariffs shortly before midterm elections. And we’ve already seen examples of Trump taking or considering a softer approach, alongside first signs of open opposition to tariffs from some Republicans.
Implications for freight
To start, we’re likely to see confusion at US borders as shippers and customs try to determine what tariffs to apply.
The bigger question is around frontloading.
There is not enough time for a tariff-free, post-IEEPA, pre-Section 122 volume surge, as 122 goes into effect on February 24th. But, in cases where Section 122’s 15% tariff represents a reduction from IEEPA levels, will this change be enough to trigger ocean frontloading to get ahead of the end of July expiration date after which tariffs may increase?
For importers of Brazilian goods, the answer is probably yes. And for some shippers, a five percentage point reduction on tariffs for shipments from China or Vietnam may be enough reason to increase orders. Though Section 122 tariffs will expire in July, tariffs by other means could be introduced before then, so we may see some signs of frontloading as soon as manufacturing picks back up post-Lunar New Year in early March.
On the other hand, for many shippers, the relatively modest tariff reduction for most countries – and the high levels of uncertainty – may not be enough to spur a frontloading surge, especially if they suspect the White House may ultimately soften its stance due to political concerns. So, we’ll probably see somewhat stronger US import volumes in the coming months, and possibly an earlier start to peak season, than we otherwise would have, but we may not see the levels of frontloading that tariff threats spurred last year as most shippers remain cautious.
For air cargo, these tariff changes could likewise be reflected in some increase in US bound volumes in the coming months. But with de minimis still suspended, we’re unlikely to see a big or sudden volume surge for air cargo either.
Refunds – another question mark
The Supreme Court left it for the lower courts to decide the issue of refunds for IEEPA tariffs already paid. And while the courts are likely to require refunds, some experts do not think the process will be simple, cheap, automatic or quick, though others do think that a decision as to whether or not the government will be required to issue refunds could come soon.
As such, shippers are being encouraged to take the steps that could make them eligible for a refund as soon as possible, with many already making moves in recent months in anticipation of a court ruling.
Most businesses and logistics providers consider stability and predictability as the most important ingredients to planning, efficiency and growth. But, like much of the past year, the impact of this latest sudden change is more uncertainty, and possibly more volatility for freight markets.
