10% or 15%?: Confusion prevails over US global tariffs

The temporary surcharge, effective from 12:01 am on February 24, follows last week’s 6-3 ruling by the Supreme Court of the US striking down the administration’s sweeping reciprocal tariffs imposed under the International Emergency Economic Powers Act (IEEPA). The court held that the president had exceeded his authority, reaffirming that the power to levy tariffs rests with Congress.

Within hours of the judgment, the administration pivoted to Section 122, which permits a temporary import surcharge of up to 15 per cent for a period not exceeding 150 days unless extended by Congress. Although Trump subsequently stated that he would raise the tariff to the “fully allowed” 15 per cent level, the rate that has formally taken effect remains 10 per cent.

According to the presidential proclamation, the measure is intended to address what the administration described as “large and serious balance-of-payments deficits” and fundamental international payments problems. Officials cited a persistent goods trade deficit of around $1.2 trillion in 2024 and 2025, a current account deficit equivalent to 4 per cent of GDP, and a sharply negative net international investment position.

Under the proclamation issued pursuant to Section 122, the 10 per cent surcharge is structured as a temporary ad valorem import duty and applies in addition to existing tariffs. It is levied on top of most-favoured-nation (MFN) rates and other applicable trade remedies, including Section 301 and Section 232 duties, except for products specifically exempted in the annexes to the order.

While no formal documentation has yet been issued to implement a higher rate, officials have indicated that further executive action remains under consideration, sustaining uncertainty over the ultimate tariff framework.

The proclamation includes a broad list of exemptions reflecting domestic supply constraints and strategic priorities. Goods already subject to Section 232 tariffs under the Trade Expansion Act of 1962 remain unaffected. Duty-free imports qualifying under the US-Mexico-Canada Agreement and textile and apparel goods under the Dominican Republic-Central America Free Trade Agreement are also exempt.

US Customs and Border Protection has stopped collecting the invalidated IEEPA tariffs and begun enforcing the new 10 per cent surcharge from February 24.

US Trade Representative Jamieson Greer said the administration would move quickly to preserve its broader trade agenda, including reducing the goods trade deficit and encouraging domestic manufacturing. He confirmed that tariffs imposed under separate statutory authorities including Section 301 duties on China ranging from 7.5 to 100 per cent and sectoral Section 232 tariffs of 10 to 50 per cent remain in force, covering roughly 30 per cent of US imports. Additional accelerated Section 301 investigations targeting industrial overcapacity, digital taxes and technology discrimination are also planned.

Though the Supreme Court ruling invalidated Trump’s so-called “Liberation Day” tariffs introduced since February 2025, more than $133 billion had been collected under those measures by late 2025, with total receipts projected to approach $175 billion. While the court did not address refunds, affected companies have begun exploring legal avenues to recover payments.

Financial markets initially reacted positively to the court’s decision, viewing it as a check on executive overreach and a reduction in policy uncertainty. However, the rapid shift to Section 122 and the prospect of a higher 15 per cent rate has reintroduced volatility into trade planning and supply chains.

International reaction has been cautious. The United Kingdom signalled that no reciprocal action was “off the table” if prior tariff understandings were not honoured, while emphasising that “no one wants a trade war.” The European Union said it would suspend ratification of a recently negotiated arrangement pending clarity on US tariff policy.

In Asia, responses have diverged. China called on Washington to remove what it described as “unilateral tariffs” following the recent trade developments. In a statement issued on February 23, China’s commerce ministry said it is conducting a comprehensive review of the ruling by the Supreme Court of the United States and urged the administration of Donald Trump to withdraw related tariff measures affecting trading partners. The ministry argued that such actions breach international trade rules as well as US domestic law and do not serve the interests of any party, adding that China would continue to monitor developments closely and take firm steps to safeguard its national interests.

India, meanwhile, has adopted a measured approach. Commerce and Industry Minister Piyush Goyal said New Delhi will resume trade talks with the US once there is greater clarity on the evolving tariff landscape. India and the US had on February 22 postponed a scheduled meeting in Washington between chief negotiators aimed at finalising the interim trade pact, underscoring the uncertainty surrounding US trade and tariff policies.

While Section 122 provides a clearer statutory basis than the IEEPA, its 150-day cap underscores the temporary nature of the measure. Unless extended by an Act of Congress, the surcharge will lapse after July 24, raising fresh uncertainty over whether US global tariffs will continue beyond that date.

With the administration openly weighing additional tariff pathways and Congress yet to signal whether it will approve an extension, governments and businesses remain in limbo over whether the current 10 per cent rate will be sustained, replaced by the proposed 15 per cent levy, or allowed to expire altogether.

Fibre2Fashion News Desk (CG)