Section 122 vs IEEPA: How the New 10% Tariff Affects Your Business

What Section 122 Actually Is

Section 122 of the Trade Act of 1974 grants the President emergency authority to impose temporary, uniform tariffs to address balance of payments crises. It's been used exactly twice before:

• • 1971: Nixon imposed a 10% surcharge for 4 months
• • 1985: Reagan briefly considered it but never implemented

Unlike IEEPA's broad "emergency powers," Section 122 is specifically designed for tariff imposition — which is why it survived constitutional scrutiny.

Side-by-Side Comparison

The Winners and Losers

Section 122 Exemptions

Unlike IEEPA's targeted approach, Section 122 applies broadly but includes specific exemptions:

Countries Exempt from Section 122

• • Israel: Free trade agreement protection
• • Jordan: Free trade agreement protection
• • Australia: Security alliance carve-out

Note: USMCA countries (Canada/Mexico) are NOT exempt — Trump explicitly included them

Products Exempt from Section 122

• • Petroleum and petroleum products (HTS Chapter 27)
• • Natural gas and LNG (HTS 2711.11-2711.29)
• • Critical minerals (lithium, rare earths — see Federal Register notice)
• • Pharmaceutical APIs (designated life-saving drugs)
• • Emergency medical supplies (HTS 3006, 9018-9022 specified items)

Planning Implications for Your Business

Immediate Impact (March-July 2026)

Cash flow implications vary dramatically by sourcing mix:

• • Heavy China importers: Massive cash flow improvement (135% tariff reduction)
• • European/Japanese sourcing: New 10% cost increase to absorb or pass through
• • Diversified importers: Net impact depends on country mix

The July 24 Cliff

Section 122 expires exactly 150 days after implementation — July 24, 2026. After that date:

• • No automatic extension (unlike IEEPA's indefinite duration)
• • Congress must act to extend or make permanent
• • Section 301 replacement tariffs under development (country-specific)
• • Possible return to pre-IEEPA rates if no replacement enacted

Strategic Sourcing Decisions

Short-term arbitrage opportunities:

• • Accelerate Chinese imports while Section 122 rates are low
• • Delay European/Japanese imports until July 24 (if possible)
• • Lock in fixed-price contracts with suppliers in newly-tariffed countries

Long-term supply chain planning: The July expiration creates planning uncertainty. Most procurement teams are maintaining diversified sourcing rather than making dramatic short-term shifts.

How Section 122 Affects Your IEEPA Refund Claim

Critical point: Section 122 tariffs are completely separate from your IEEPA refund rights.

Cash Flow Timing Considerations

The combination of Section 122 costs and expected IEEPA refunds creates cash flow planning opportunities:

• • Chinese importers: Lower current costs + large refund coming = strong liquidity position
• • European importers: Higher current costs + modest IEEPA refunds = potential cash squeeze
• • Mixed importers: Model both streams to optimize working capital

What's Coming After July 24

The Trump administration has signaled its post-Section 122 strategy:

Section 301 Investigations Launched

USTR has initiated Section 301 investigations on:

• • China: "Continued unfair trade practices" (targeting 60-100% rates)
• • EU: "Digital services tax and subsidies" (targeting 25-40% rates)
• • Canada/Mexico: "USMCA violations" (targeting 15-25% rates)

Section 301 tariffs would be country-specific (unlike Section 122's uniform approach) and have no time limit.

Congressional Dynamics

Congress faces a choice by July 24:

• • Extend Section 122: Requires new legislation (unlikely given uniform 10% rate)
• • Let it expire: Return to pre-IEEPA tariff levels
• • Enact permanent tariffs: Through regular legislative process

Most Hill watchers expect Section 122 to expire on schedule, with selective Section 301 tariffs replacing it.

Action Items for Your Business

1. 1. Recalculate your landed costs under Section 122 vs. IEEPA by sourcing country
2. 2. Model cash flow scenarios for Section 122 costs + IEEPA refund timing
3. 3. Review exemption eligibility for your product mix and HTS classifications
4. 4. Plan for the July 24 cliff — inventory strategy if Section 122 expires
5. 5. Monitor Section 301 investigations that could affect your key sourcing countries
6. 6. Pursue IEEPA refunds independently — Section 122 doesn't affect your claim rights

The Bottom Line

Section 122 is a significant shift from IEEPA's country-specific approach to a uniform 10% rate. For most importers, it's either a major cost reduction (if you were hit hard by IEEPA) or a new cost to manage (if you weren't).

But here's what didn't change: your right to recover every dollar of IEEPA duties you paid. Section 122 is prospective. Your IEEPA refund claim looks backward. They're completely separate.

Focus on both: optimize your supply chain for the new Section 122 environment while aggressively pursuing your IEEPA refund claim. Do them in parallel — not sequentially.

This article is for informational purposes only and does not constitute legal, financial, or tax advice. Consult qualified counsel before making decisions about your tariff refund claims.

For details on our calculation approach, see our Methodology.