Washington Policy Research: Rebuilding a Tariff Regime
Prepared by Baird Strategas LLC, FINRA member
In February, the Supreme Court ruled that the global tariffs the Trump administration had imposed under IEEPA were unconstitutional. The administration is now putting a replacement tariff plan in place.
After the Supreme Court ruled that the International Emergency Economic Powers Act (IEEPA) could not be used to impose tariffs on nearly every country, the White House used Section 122 of the Trade Act of 1974 to impose temporary 10% tariffs on nearly every country. Those tariffs expired after five months (on July 24, 2026), but were meant not as a long-term solution but as a placeholder while the administration conducted investigations into trading partners to unlock a different trade authority. That additional authority, Section 301 of the Trade Act of 1974, allows the president to impose tariffs following an investigation into trading partners’ practices that burden or restrict U.S. commerce. The administration is using Section 301 tariffs to reconstitute the tariff regime it had under IEEPA, and it has signaled to trading partners that, in general, they will not receive higher tariffs than those agreed to as part of the trade deals they made with the U.S.
The first of those Section 301 investigations was on trading partners’ forced labor laws and the enforcement of them. The administration announced 10.0%–12.5% tariffs effective July 24 (replacing the temporary Section 122 tariffs) on 60 trading partners based on that Section 301 investigation. An investigation into the structural excess manufacturing capacity of 16 trading partners is also in the works, with tariffs expected to follow. The White House also recently announced additional tariffs on Brazilian imports, Canadian imports, additional steel/ aluminum/copper derivative products, and polysilicon and its derivative products. The tariffs on Canadian goods are likely a negotiating tactic related to discussions on reforming the United States-Mexico-Canada Agreement (USMCA) trade pact, but the others are likely to go into effect.
The new tariffs, while adding to uncertainty, have been more modest than what the president has proposed in the past. For instance, the tariffs on Brazil amount to $3 billion on an annual basis and the tariffs on additional metal products amount to just $1.5 billion on an annual basis. Therefore, it seems unlikely to us that the U.S. will revert to the $400 billion level of tariffs in place before the Supreme Court ruled on IEEPA (see above). That does mean that the U.S. is taking in less tariff revenue than had been expected, but it is also providing more fiscal support for businesses and consumers than if tariffs were higher. In addition, the administration has been careful about raising tariffs on certain goods that directly impact consumers’ bottom lines (e.g., coffee, beef) given concerns about affordability.
With trade policy still a moving target, we'll be monitoring changes closely to separate meaningful developments from market noise
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