After the Rebuke: Trump Signs a New 10% Global Tariff Under Section 122 — and the Trade War Resets Immediately

For one brief window on Friday morning, it looked like the great American tariff saga might be over. The Supreme Court ruled 6-3 that President Trump lacked the authority to impose sweeping global tariffs under the International Emergency Economic Powers Act, a 1977 law designed for sanctions and asset freezes, not broad trade policy. Markets surged. Economists exhaled. Importers began calculating their potential refund checks.

Then came the afternoon.

Standing in front of reporters at the White House, a visibly furious president called the ruling "deeply disappointing" and said he was "ashamed" of some members of the Court. Then he announced that he would sign an executive order imposing a new 10% global tariff — this time using Section 122 of the Trade Act of 1974. "Today, I will sign an order to impose a 10 percent global tariff under Section 122, over and above our normal tariffs already being charged," Trump said. "This is effective next week."

The trade war didn't end Friday. It restarted under different legal architecture.

What Section 122 Actually Allows

The Trade Act of 1974 was designed to give presidents a range of tools to manage international commerce. Section 122 is one of those tools, and it is meaningfully different from the IEEPA authority the Court just struck down.

Under Section 122, a president can impose tariffs of up to 15% to address what the law describes as "large and serious" balance-of-payments deficits — periods when the country is spending significantly more on imports than it earns from exports. The authority is temporary by design: tariffs imposed under Section 122 expire after 150 days unless Congress votes to extend them. Unlike the effectively unlimited IEEPA authority, Section 122 has a statutory ceiling and a built-in sunset.

The practical result: the new 10% tariff is legal, but bounded. If Congress does not act to extend it, the duties expire around July 19, 2026. And unlike the "reciprocal" tariffs that had pushed effective rates well above 100% on some trading partners, this 10% rate is a far more modest baseline — though it applies on top of existing tariffs that remain in place.

The Market's Complicated Reaction

The sequence of events on Friday produced some of the most whiplash-inducing trading of 2026. When the Supreme Court ruling dropped at 10:07 a.m. Eastern time, the S&P 500 surged more than 1.4%. Amazon jumped 3.1% on hopes that logistics costs would normalize. Apple climbed nearly 2.5%. The Nasdaq touched 23,100.

Then, as the details of Trump's Section 122 announcement filtered into trading desks, the rally deflated. The S&P 500 pared its gain to roughly 0.7% by the close. Amazon and Apple each gave back about half their earlier advances. The VIX, which had briefly dipped below 18, crept back toward 20.

The message from the market was clear: a 10% tariff is better than a 104% tariff. But it is not the same as no tariff. The effective tariff rate on U.S. imports, which had been climbing toward historic highs under the IEEPA framework, drops significantly under Section 122 — but it does not return to pre-2025 levels. Country-specific tariffs on China, Canada, Mexico, and steel and aluminum remain in effect under separate legal authorities and are not affected by either the SCOTUS ruling or the Section 122 executive order.

What Prices Will Actually Do

The Yale Budget Lab, which has been tracking the fiscal impact of tariff policy with unusual granularity, released an updated analysis Friday afternoon. Under the new Section 122 baseline, the effective tariff rate on U.S. imports drops substantially from the peak levels reached under the IEEPA framework — but the remaining tariff structure is still significant. Households in the bottom income quintile will absorb a disproportionate share of the cost through higher prices on consumer goods, electronics, and imported food products.

The Tax Foundation estimated that the Section 122 tariff alone would raise the price level by approximately 0.6% in the short run — representing roughly $800 in additional annual costs for the average American household and about $400 for households at the lower end of the income distribution.

The critical question is what comes next. Trump has repeatedly signaled that he views tariffs as a permanent policy tool, not a temporary negotiating device. And with Section 122 giving him 150 days to pressure Congress into a legislative trade framework, the most likely outcome is not the end of tariffs but rather a race to either codify them or replace them with something more durable before the summer deadline.

Winners, Losers, and the Portfolio Calculus

For investors, the transition from a triple-digit tariff regime to a 10% baseline is meaningful, but the analysis is more nuanced than a simple "tariff good, no tariff better" framework suggests.

Companies with heavily globalized supply chains — think Apple, Nike, and large retailers — get a significant reprieve from the removal of the highest-rate IEEPA tariffs. But they are not out of the woods. Country-specific tariffs remain, and the 150-day clock on Section 122 creates a new layer of uncertainty for capital allocation decisions.

Domestic manufacturers that had been protected by the high tariff wall face a more competitive import environment. Steel and aluminum producers are shielded by separate tariffs, but sectors that had been benefiting from artificially high barriers will feel the pressure of imports flowing in at lower cost.

Fixed-income markets may get the clearest signal. Lower tariffs mean lower inflationary pressure, which incrementally improves the Fed's ability to consider rate cuts in the second half of 2026. The 10-year Treasury yield fell 5 basis points on Friday afternoon as the tariff picture clarified.

The Constitutional Question Isn't Finished

Legal analysts were quick to note on Friday that while the IEEPA tariff authority has been curtailed, the broader question of presidential trade power is far from settled. The Section 122 authority has a stronger legal foundation because it was explicitly written for trade purposes — but its 150-day limit and 15% ceiling create real constraints on the administration's ambitions.

Congressional Republicans face a binary choice in the coming weeks: vote to extend the tariffs and own the political consequences, or let them expire and hand the president a foreign policy setback. Neither option is comfortable. The trade war, in other words, has now entered its most politically complicated phase — which may also make it, from an investor's perspective, the most unpredictable one.

For the moment, markets have chosen to interpret the day as a net positive. A 10% tariff is a known quantity in a way that an uncapped emergency authority never quite was. But the work of understanding exactly what the new tariff landscape means for corporate earnings, consumer prices, and Federal Reserve policy is only beginning — and it will drive markets for months to come.