US Ends IEEPA Tariffs, Imposes 10% Section 122 Duty

Following a sweeping legal reversal in Washington, countries that previously secured trade deals with the United States — including Vietnam, Cambodia and Malaysia — are now subject to a uniform 10% temporary ad valorem surcharge under Section 122, rather than the 19% or 20% 'reciprocal tariff' rates outlined in earlier bilateral agreements.

Supreme Court Ruling Nullifies IEEPA-Based Tariffs

The shift comes after the Supreme Court of the United States ruled that tariffs imposed by former President Donald Trump under the International Emergency Economic Powers Act (IEEPA) were invalid. As a result, both the reciprocal tariffs and the additional 'fentanyl tariffs' enacted under that authority have been terminated.

On February 22, U.S. Customs issued a formal notice confirming that, effective February 24, 2026, all tariff measures based on IEEPA — including reciprocal and fentanyl-related duties — would cease.

Previously negotiated tariff rates under bilateral trade agreements relied on IEEPA authorization. With that legal foundation removed, the agreed tariff provisions have effectively lapsed.

Section 122: A Uniform 10% Global Surcharge

According to updated guidance from U.S. Customs and Border Protection, beginning February 24, 2026, all countries and territories are subject to a 10% global surcharge under Section 122, applied under HTSUS heading 9903.03.01. No country-specific exemptions are currently in place — including for Malaysia, Vietnam and other economies that had secured reduced reciprocal tariff arrangements.

Although Trump has publicly suggested the surcharge could rise to 15%, the official notice maintains the rate at 10%. The proposed 15% level has not taken effect.

Section 122 tariffs are temporary emergency measures with a maximum duration of 150 days. During this period, the White House is expected to pursue alternative mechanisms to reconstruct its tariff framework, primarily through:

• Section 301 tariffs targeting unfair trade practices

• Section 232 tariffs justified on national security grounds

Trade Deal Countries Face Strategic Uncertainty

Before the court's ruling, the United States had reached tariff-reduction agreements with multiple economies, including:

• The United Kingdom (10%)

• The European Union (15%)

• Cambodia (19%)

• Indonesia (19%)

• Malaysia (19%)

• The Philippines (19%)

• Vietnam (20%)

• Japan (15%)

• Pakistan (19%)

• South Korea (15%)

• Taiwan (15%)

• Switzerland (15%)

• Liechtenstein (15%)

Under those arrangements, Washington pledged to lower reciprocal tariff rates in exchange for commitments such as expanded investment, reduced trade barriers, or enhanced market access.

Although U.S. Trade Representative Jamieson Greer has stated that these agreements 'remain valid,' the practical effect of the court decision is that their tariff provisions are no longer operative.

This creates a significant policy contradiction. While tariff concessions have disappeared, non-tariff commitments — such as market liberalization or investment pledges — may still stand. For countries that negotiated under intense pressure to secure lower duties, the situation represents a stark reversal.

Risk of Higher Effective Tariffs

The 10% Section 122 surcharge is applied in addition to existing Most-Favored-Nation (MFN) tariff rates. For example, if a product carries a 3% MFN rate, the total effective tariff is now 3% + 10% = 13%.

If the surcharge rises to 15%, as Trump has threatened, the same product would face a combined rate of 18%.

That would exceed the maximum 15% cap embedded in agreements with economies such as the United Kingdom, the European Union, Japan, South Korea, Switzerland and Liechtenstein, where negotiated ceilings included MFN duties. In practical terms, a product with a 3% MFN rate under those deals would face a total of 15% (3% + 12%), not 18%.

China Emerges as a Major Beneficiary

China is among the largest direct beneficiaries of the Supreme Court's decision. The ruling not only removed the 10% reciprocal tariff previously applied to Chinese goods but also invalidated the additional 10% fentanyl-related tariff.

The fentanyl tariff had particular significance because it applied universally across all product categories, with no exclusions. By contrast, earlier reciprocal tariffs exempted a broad range of goods, including electronics.

However, strategic uncertainty remains. Trump is expected to visit China in late March, raising the possibility of renewed negotiations. After multiple rounds of trade confrontation, Beijing has demonstrated its ability to retaliate — notably through its dominant position in the global rare earth supply chain, a critical leverage point in trade diplomacy.

Section 301 Investigations Likely to Reshape Tariff Policy

In late 2025, the Trump administration launched a new Section 301 investigation into whether China complied with commitments made during Trump's first-term trade agreement. That probe could serve as the legal basis for future tariff increases or as a negotiating instrument.

Similarly, regardless of whether the Southeast Asian tariff agreements remain technically valid, Washington appears poised to rely on Section 301 or Section 232 investigations to reassert tariff pressure in the region.

Broader Economic Implications

The cancellation of reciprocal tariffs provides short-term relief for both the U.S. economy and global trade flows. While Trump has signaled intentions to rebuild tariff barriers, such measures have faced sustained domestic opposition in the United States.

Whether the administration ultimately reinstates elevated tariffs at prior levels — or recalibrates under legal and political constraints — remains uncertain. What is clear is that the global trade landscape has entered another phase of volatility, with multinational exporters reassessing compliance strategies, supply chains and tariff exposure in real time.