Trump Pivots to Section 122 Tariffs After Supreme Court Setback

The legal battle over U.S. trade policy has entered a volatile new phase. Despite the Supreme Court striking down the use of the International Emergency Economic Powers Act (IEEPA) for broad tariffs, the Trump administration is doubling down. This isn't just a policy shift; it's a test of executive power versus judicial oversight. The administration's rapid pivot from IEEPA to Section 122 of the Trade Act of 1974 demonstrates a law-fare approach to trade policy, where the executive branch cycles through different legal authorities to maintain leverage over trading partners.

The move to a 15% duty—the statutory maximum allowed under Section 122—is a tactical escalation designed to show that the judicial setback will not result in a tariff holiday. While IEEPA offered more flexibility, Section 122 provides a specific, albeit temporary, mandate for balance-of-payments emergencies. By hitting the ceiling immediately, the administration is signaling to the European Union, China, and India that the pressure remains constant. This aggressive stance has already had immediate diplomatic consequences, with the European Parliament deciding to postpone a critical vote on a U.S.-EU trade deal that was intended to provide exemptions for key sectors like pharmaceuticals and aircraft parts.

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The move to a 15% duty—the statutory maximum allowed under Section 122—is a tactical escalation designed to show that the judicial setback will not result in a tariff holiday.

Market participants are now grappling with the license fees threat mentioned in the President's recent social media posts. This is a relatively novel concept in trade enforcement and could represent an attempt to bypass traditional tariff structures entirely. If implemented, such fees could create a new layer of costs for multinational corporations, further pressuring margins that are already squeezed by supply chain realignments and geopolitical instability. The uncertainty surrounding these next moves sent major indices, including the Dow Jones Industrial Average and the S&P 500, lower as investors weighed the risk of a prolonged and unpredictable trade war.

The geopolitical fallout is particularly acute in Brussels. The EU's decision to delay its trade vote highlights a breakdown in trust and a shift toward defensive trade postures. The deal under consideration would have removed duties on many U.S. industrial goods in exchange for exemptions on hundreds of food items and critical minerals. With the 15% duty set to take effect at 12:01 AM EST on Tuesday, the window for negotiation is closing, and the risk of retaliatory measures from the EU and other major economies is rising.

Looking ahead, the focus shifts to the U.S. Trade Representative's office and Jamieson Greer. The administration's claim that the Supreme Court ruling actually affirmed their ability to use other laws suggests they are preparing for even more aggressive actions. This could include Section 301 investigations, which carry the potential for much higher duties than the 15% cap of Section 122. Investors and corporate strategists should prepare for a period of high volatility as the legal and regulatory landscape for global trade is rewritten in real-time, with the executive branch testing the limits of its statutory authority at every turn.