[ANALYSIS] Trump imposes 15% temporary tariffs under Section 122

OVERVIEW Following the Supreme Court’s decision to strike down the administration’s IEEPA-based “Liberation Day” tariffs, President Trump announced a 10% global tariff on Friday under Section 122 of the 1974 Trade Act. On Saturday, Trump raised that rate to 15% with immediate effect, the statutory maximum allowed under Section 122. Section 122 tariffs are temporary and expire after 150 days (scheduled expiry: 24 July 2026) unless Congress extends them. Analysts have noted that the administration could theoretically allow the tariffs to lapse and then immediately declare a new balance-of-payments emergency to restart another 150-day clock. Trump over the weekend said that they will use the 150 days that the temporary tariff allows to work on issuing other legally permissible tariffs. Section 232 (national security) and existing Section 301 tariffs remain unchanged and intact. The White House is pursuing investigations under Section 232 (national security) and Section 301 (unfair trade practices) to implement more permanent tariffs that do not have a built-in expiry date. WHAT DOES THIS MEAN?1) Global Tariff Structure The US moves from targeted IEEPA tariffs to a flat 15% universal surcharge, simplifying the tariff regime. The effective tariff rate remains historically elevated but slightly below pre-ruling peak levels. According to Yale Budget Lab estimates, the effective tariff rate rises to ~13.7%, up from 9.1% post-ruling but below ~16% under IEEPA. The 15% ceiling caps near-term escalation under Section 122, but does not eliminate escalation risk via other authorities. 2) Winners and Losers According to FT data analysis, the new flat structure benefits countries previously facing the heaviest penalties, including China and Brazil. Allies such as the UK, EU and Japan face proportionally larger increases under a flat 15% levy versus prior negotiated arrangements. EU and Japan had previously negotiated 15% rates. Under the old system, their 15% rate was a "special" lower rate compared to rivals (like China or Brazil) who faced much higher duties. Now that everyone is at 15%, their relative advantage has disappeared. The UK is the hardest hit among these allies because it had previously negotiated a 10% rate. Analysts describe this as a major blow to the UK, which had initially been held up as the prime example of a successful "dealmaker" with the administration. Goldman Sachs notes that most Asian economies will experience slightly lower US tariffs relative to the pre-ruling IEEPA regime, with China seeing the largest decline. 3) USMCA and Exemptions The White House clarified that USMCA-compliant goods remain exempt from the new 15% tariff. Civil aircraft parts, certain high-tech products and critical minerals remain exempt. 4) Trade Deals and Negotiations US officials insist tariff deal partners should honour prior agreements. USTR Greer has sought to separate bilateral tariff agreements from the new universal 15% surcharge. Some bilateral deals referencing now-void emergency tariffs (e.g. Switzerland, India) may require redrafting. India has postponed trade talks with the US following the Supreme Court ruling. The European Parliament’s trade chief proposed freezing ratification of the EU-US trade deal, pending clarification. UK officials say they are seeking the “best deal possible” for UK firms. Germany’s Chancellor Merz stated Europe will present a coordinated EU position in Washington. WHAT HAPPENS NEXT?1) The 150-Day Clock Section 122 tariffs expire after 150 days unless Congress acts. The administration could allow them to lapse and restart another 150-day period, though this may invite legal challenges. More likely scenario: migration toward Section 301 tariffs following ongoing investigations. 2) Section 301 & Section 232 Pathways Section 301 allows targeted tariffs for unfair trade practices but requires investigation. Section 232 permits sectoral tariffs (steel, autos, semiconductors, pharma) under national security grounds. These routes offer durable tariff authority without automatic expiry. 3) Refund Litigation Roughly USD 130–180bln in IEEPA tariff revenues may face refund litigation. Legal process could take years, creating fiscal and policy uncertainty. GLOBAL REACTIONSEurope The UK is seeking favourable adjustments to protect domestic firms. French Trade Minister Forissier said the EU has tools to retaliate. ECB President Lagarde warned the move risks upsetting the prior US-EU “equilibrium” and poses a new economic headwind. Germany emphasised that tariff policy is an EU competence and pledged a coordinated response. Asia China’s MOFCOM is assessing the ruling and urged the US to lift unilateral tariffs, arguing they breach trade rules. Hong Kong’s Financial Services Secretary called the additional tariff a “fiasco.” Japan’s LDP tax chief described the tariff situation as a “real mess.” South Korea confirmed that chips are not subject to the new tariffs, and consultations continue favourably. ANALYST VIEWSGoldman Sachs Effective tariff increase since 2025 now ~9pps (down from >10pps under IEEPA). "The policy changes were in line with our expectations, and our estimates of the effects of tariffs on inflation and growth are consequently little changed." "Most of the tariff drag on growth occurred in 2025, and most of the tax cut boost will occur in 2026, resulting in a positive swing in the policy impulse that should drive a growth pick-up this year. Risks skew slightly higher post-midterms if the administration restores prior tariff levels via Section 301. ING Section 122 is likely “smoke and mirrors” to buy time for Section 301. Legal vulnerability remains. Trade deals referencing emergency tariffs may need renegotiation. Macro outlook unchanged. MARKET & MACRO IMPLICATIONSInflation Goldman Sachs estimates tariff passthrough has already lifted core PCE by ~0.7pp, with only ~0.1pp additional impact expected through 2026. GS says companies are unlikely to reverse prior price increases even if tariff rates modestly fall for certain partners. ING expects no change to inflation or growth forecasts based on the current tariff structure. Growth Goldman Sachs forecasts 2.5% GDP growth in 2026 Q4/Q4, with tariff drag largely concentrated in 2025. GS says import flows may rebalance: China imports likely rebound modestly; trade rerouting effects unwind. Net GDP impact expected to be limited in the near term. Policy Uncertainty Section 122 is legally untested and rooted in balance-of-payments language that may be difficult to defend in court. Analysts widely view Section 122 as a bridge mechanism, buying time for Section 301 actions. Trade policy volatility remains structurally elevated.