One tariff ends, another begins

The temporary 10 per cent tariffs imposed under Section 122 reached the end of their 150-day statutory life at midnight on 24 July, and at that moment the administration unveiled a tough new tariff regime under Section 301. The legal basis changed. The tax at the border stayed almost exactly the same.

One statute hands over to the next

Logistics managers who had hoped for a break from tariffs were disappointed. The new Section 301 orders set up a permanent two-tier schedule covering about sixty economies. Countries that cooperate with bilateral supply-chain reviews pay a baseline rate of 10 per cent, and those that do not pay 12.5 per cent. By swapping Section 301 in for the lapsing Section 122, the White House sidestepped the statutory deadline and kept its customs revenue, worth billions of dollars, flowing.

The two statutes were written for different purposes. Section 122 is a short-term tool for balance-of-payments problems, capped in rate and in time. Section 301, also part of the Trade Act of 1974, lets the trade representative act against foreign practices that are unreasonable or discriminatory and burden American commerce, after an investigation. It has no expiry date and no statutory cap on the rate, which is what makes it attractive to an administration that wants tariffs to last.

A statute with a track record

Section 301 has been used for decades. In 1987 the Reagan administration imposed 100 per cent tariffs on selected Japanese electronics in a dispute over semiconductors, and from 2018 the first Trump administration used it to impose tariffs on several hundred billion dollars of Chinese imports in successive lists. Thousands of importers challenged those China tariffs in court, and after years of litigation the courts left them in place. That record helps explain the statute's appeal to an administration whose emergency tariffs were ruled unlawful by the trade court and an appeals court in 2025: judges have shown more willingness to defer to the executive under a statute that explicitly contemplates tariffs.

What is new is the scale. Past Section 301 actions targeted one country at a time, each backed by an investigation into specific practices. Applying the statute to about sixty economies at once, with rates tied to cooperation in supply-chain reviews, stretches it further than before. Importers will argue that each country's tariff needs its own findings, and the courts will have to decide how much process the statute requires.

What the models must change

For anyone modelling trade flows, the headline rate barely moved, but the expected duration did. Under Section 122 every importer knew the surcharge would lapse on a fixed date, and many held goods in bonded warehouses or delayed shipments to clear customs after 24 July. That produced a dip in imports during the surcharge and a planned surge once it ended. With the new regime in force from the same moment, the surge loses its reason, and some of those delayed goods will now pay the Section 301 rate instead of none.

Expected duration changes behaviour in a deeper way too. A tariff that will lapse in months is best absorbed through inventory timing and temporary margin cuts. A tariff expected to last for years justifies moving production, renegotiating supply contracts and raising prices permanently. Import-demand equations estimated on the Section 122 period will therefore understate how strongly firms respond to the new rates over time.

Two tiers, one incentive

The gap of 2.5 percentage points between the tiers is designed to reward signing up. For goods with thin margins, such as clothing, furniture and consumer electronics, that difference can decide which supplier wins an order, so trade is likely to shift towards countries in the lower tier rather than back to the United States. Governments in the higher tier face pressure from their own exporters to join the reviews, which gives Washington leverage in bilateral talks.

Winners and losers

The Treasury wins a steady flow of customs revenue that no longer depends on a temporary statute. Domestic producers competing with imports gain lasting protection, and exporters in lower-tier countries gain market share from those in the higher tier. The losers are American importers and their customers, who pay the duties, and the logistics businesses that had planned for a surge in shipments after the surcharge lapsed. Exporters in the higher tier lose most among foreign suppliers.

Here to stay

The handover shows that tariffs have stopped being a passing bargaining threat and become a lasting feature of American fiscal and industrial policy.

The strongest counterargument is that nothing in trade policy is permanent. A future administration could lower or remove Section 301 tariffs by executive action, court challenges could narrow the new regime, and bilateral deals could move countries from the higher tier to the lower one or exempt products. All of that is possible, but the China tariffs of 2018 have survived a change of administration and years of litigation, which suggests that tariffs under this statute tend to outlast the politics that created them.

The signals to watch are the trade representative's notices setting out the investigations behind each country's rate, suits filed at the Court of International Trade, monthly customs receipts, and import volumes in August and September as the delayed shipments arrive. Companies waiting for tariffs to lapse should stop waiting: the switch from Section 122 to Section 301 means importers will probably be paying 10 to 12.5 per cent for years.