Trump's new tariff has a 150-day clock

On 24 February, days after the Supreme Court's rebuke, the White House invoked Section 122 of the Trade Act of 1974 and imposed an immediate, temporary 10 per cent tariff on all goods imports. The administration has not given up. The new tariff, though, comes with a legal time limit of 150 days that it cannot avoid.

What Section 122 allows

Section 122 lets the president deal with 'large and serious balance-of-payments deficits' through temporary import surcharges of up to 15 per cent. The emergency powers claimed under IEEPA had no end date. Section 122 tariffs lapse after 150 days unless Congress passes a joint resolution approving them.

The provision has never been used before, and its history explains its shape. On 15 August 1971 Richard Nixon imposed a 10 per cent surcharge on imports, relying on wartime emergency law, as he suspended the dollar's convertibility into gold. The surcharge was dropped that December once the major economies agreed new exchange rates at the Smithsonian Institution. When Congress wrote the Trade Act three years later, it gave future presidents a similar tool but capped the rate and set a time limit, precisely so that a temporary measure could not become permanent without a vote.

A trigger built for another era

The statute's language belongs to the world of fixed exchange rates, when a country running out of reserves to defend its currency faced a genuine balance-of-payments crisis. Under floating rates, a current-account deficit is financed by capital inflows and adjusts through the exchange rate, so the idea of a payments emergency is harder to pin down. America has run current-account deficits for most of the past four decades without a funding crisis. Importers are likely to argue in court that the trigger has not been met, although judges may be reluctant to second-guess a finding the statute leaves largely to the president.

The arithmetic of the bridge

The rate leaves room to move. At 10 per cent, the surcharge sits below the 15 per cent ceiling, so the administration can raise it without new legal authority if negotiations stall. It also applies across all goods imports, whereas the emergency duties varied by country, which blunts its value as a lever against any single trading partner. A flat tariff punishes allies and rivals alike and offers little to trade away in a bilateral deal.

For the Treasury, the surcharge restores part of the revenue that disappeared with the court ruling, but only for five months. Budget forecasters cannot count on it beyond the summer, and the refund bill for the voided emergency duties still has to be paid. The net effect is more borrowing than was expected at the start of the year, cushioned for a while by the new receipts. Bond investors will watch whether the gap is filled with bills or with longer-dated debt.

The currency market adds a twist. Textbook theory says a broad tariff should strengthen the currency of the country imposing it, because Americans buy fewer imports and so sell fewer dollars, and that appreciation offsets part of the tariff for importers. The reverse happened in 2025, when the dollar had its worst first half since 1973 even as tariffs rose, because investors worried more about policy uncertainty and the Fed's independence than about trade flows. A temporary surcharge with a known end date gives the currency market little to price, which suggests the dollar will take its cue from interest rates and the Fed rather than from the tariff.

Importers watch the calendar

Supply-chain managers and traders see the new tariff as a stopgap. A 10 per cent surcharge with a fixed end date starts a countdown, and importers are already planning to push deliveries back to late summer so that goods clear customs after the 150-day window closes.

Customs law gives them tools to do it. Goods can be held in bonded warehouses or admitted to foreign-trade zones, and duty is assessed only when they are formally entered for consumption, so a retailer with space and patience can store inventory near the port and release it once the surcharge lapses. That option favours large importers with warehouse capacity and working capital. Smaller firms selling perishable or seasonal goods, such as autumn fashion or products for the school year, have less room to wait and will pay the duty.

The deferral itself has economic effects. Imports are likely to dip while the surcharge applies and bunch up once it ends, which will distort the monthly trade figures and the goods component of GDP in both directions. Anyone reading those numbers over the spring and summer will need to separate timing from underlying demand.

Where leverage runs out

The counterargument is that 150 days is long enough for the administration to prepare something sturdier. Section 301 investigations into unfair trade practices take months, but they can be launched now and completed before the surcharge expires, and Section 232 national-security tariffs already cover metals and vehicles. On that view the surcharge is a bridge to a new regime rather than a last stand. The weakness in that reasoning is that trading partners can read a calendar too, and a threat with a known expiry date is easier to wait out.

Those investigations come with procedure attached. Section 301 requires the trade representative to open a formal inquiry, publish notice, take public comments and hold hearings before acting, which gives affected industries and foreign governments a chance to argue their case on the record. The process is slower than an emergency proclamation, but a tariff built on it is harder to overturn in court, which is presumably the attraction.

Congress is the other variable. A joint resolution to extend the surcharge would need votes in both chambers, and members facing midterm elections in November may be wary of voting for a tax on imports that shows up in prices. The signals to watch are the launch of new Section 301 investigations, any move to raise the surcharge towards 15 per cent, legal challenges to the balance-of-payments finding, and import volumes in the monthly trade data. Section 122 buys the administration 150 days of tariffs and not much bargaining power. Unless Congress acts, trade policy will probably be back before the courts or on Capitol Hill by the end of the summer.