Trump Pivots to Section 122 for 10% Global Tariff After Supreme Court Defeat

The landscape of global trade and e-commerce supply chains has been thrust into a new era of volatility following a dual-pronged development in Washington. On Friday, the United States Supreme Court delivered a significant blow to the administration's trade policy, ruling 6-3 that the use of the International Emergency Economic Powers Act (IEEPA) of 1977 to levy broad-based tariffs was an unconstitutional overreach of executive authority. Chief Justice John Roberts, writing for the majority, clarified that the power to impose duties resides strictly with Congress. However, the victory for free-trade advocates was short-lived. Within hours of the ruling, President Donald Trump signed a new executive order invoking Section 122 of the Trade Act of 1974, effectively bypassing the court’s restriction by utilizing a different statutory mechanism to impose a fresh 10% global tariff.

This strategic pivot from IEEPA to Section 122 represents a critical shift in the legal justification for protectionism. While IEEPA was used under the guise of national security and economic emergencies, Section 122 is specifically designed to address balance-of-payments deficits. This authority allows the President to impose a temporary import surcharge of up to 15% for a period of 150 days. For the retail sector, this creates a 'ticking clock' scenario. The 150-day limitation means that the current 10% tariff is legally a temporary measure, yet the administration has signaled its intent to maintain these levels until 'another authority is invoked,' suggesting a cycle of rolling executive orders or a push for permanent legislative changes.

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Most notably, the new 10% flat rate replaces an 18% tariff that had been established in a recent interim trade deal with India.

For e-commerce giants and traditional retailers, the immediate impact is a mixture of cost increases and unexpected relief for specific corridors. Most notably, the new 10% flat rate replaces an 18% tariff that had been established in a recent interim trade deal with India. This 8-point reduction for Indian goods—ranging from textiles to electronics—provides a narrow window of opportunity for importers who have been struggling with high landed costs. Despite this mathematical reduction, President Trump maintained a hardline rhetoric, insisting that the 'deal with India' remains intact and that the United States will not be the one paying the tariffs. This underscores a persistent tension: while the administration views tariffs as a revenue stream paid by foreign entities, the reality for US-based retailers is an immediate increase in the cost of goods sold (COGS), which is typically passed on to the consumer.

Logistics and procurement officers must now navigate a landscape where trade policy is dictated by 150-day windows. This short-termism makes long-term contract negotiations nearly impossible. If the 10% tariff is indeed effective starting February 24, 2026, retailers must prepare for a potential price hike across all categories not already covered by existing Section 232 (steel and aluminum) or Section 301 (China-specific) duties, which the President confirmed will remain in place. The broader implication is a forced acceleration of 'near-shoring' or 'friend-shoring' as companies seek to mitigate the risk of sudden executive pivots that can alter the cost structure of a product line overnight.

Looking forward, the retail industry should watch for two key developments. First is the potential for a Congressional challenge. Since the Supreme Court explicitly stated that the power to levy duties belongs to the legislative branch, any use of Section 122 may face immediate legal scrutiny if it is perceived as a permanent fixture rather than a temporary balance-of-payments correction. Second is the reaction of trade partners like India. While Prime Minister Narendra Modi was described by Trump as a 'great gentleman,' the insistence that trade partners 'abide by trade deals' while the US unilaterally shifts the tariff floor suggests that diplomatic friction is likely to increase. For the e-commerce sector, this means the era of predictable, low-tariff global sourcing has officially ended, replaced by a regime of tactical, high-frequency regulatory adjustments.