Supreme Court Tariff Decision & Second Term U.S. Trade Deals

Executive Summary

The Supreme Court’s decision in Learning Resources, Inc. v. Trump (2026) has immediate implications for several trade arrangements negotiated during the Trump Administration’s second term. Many of those arrangements relied on tariff leverage exercised through emergency authorities, particularly tariffs imposed under the International Emergency Economic Powers Act (IEEPA). By holding that IEEPA does not authorize the President to impose tariffs, the Court removed one of the principal tools used to structure those negotiations.

The ruling does not automatically terminate existing trade arrangements. However, it changes the tariff framework that underpinned them. Where a deal depended on threatened or imposed IEEPA tariffs, the elimination of that authority alters the economic balance that originally produced the agreement.

In response, the Administration has begun using Section 122 of the Trade Act of 1974, which allows temporary import surcharges for up to 150 days, as an interim source of tariff authority. Because Section 122 tariffs can apply broadly across trading partners, they may affect several negotiated arrangements simultaneously—even where the underlying agreements remain formally in place.

For companies engaged in global trade, the decision primarily matters in three ways:

• Existing deals may operate under different tariff conditions. Eliminating IEEPA tariffs and replacing them with Section 122 measures can change the effective tariff rates facing imports under several bilateral arrangements.
• Temporary tariffs may affect multiple partners at once. Section 122 tariffs, if applied broadly, can alter trade conditions across multiple negotiated frameworks simultaneously.
• Further adjustments to trade policy are likely. The Administration may ultimately shift from Section 122 to longer‑term tools such as Section 232 or Section 301, which could again reshape the tariff environment surrounding existing deals.

The analysis below examines how these dynamics affect specific trading partners—including Japan, China, the European Union, India, the United Kingdom, and Canada/Mexico—and how tariff conditions under those arrangements may evolve following the Court’s decision.

Brief Background

Recent U.S. trade arrangements negotiated during the Trump Administration’s second term differ from traditional treaty‑based trade agreements in one important respect: they were largely structured around tariff leverage exercised through existing statutory authorities, rather than comprehensive agreements approved by Congress.

In practice, these arrangements often paired tariff actions - or the threat of tariff actions - with negotiated commitments from trading partners regarding market access, purchases of U.S. goods, regulatory cooperation, or supply‑chain coordination. Because these arrangements relied heavily on executive tariff tools, changes in the availability of those tools can affect the economic balance underlying the arrangements.

The Supreme Court Decision

In Learning Resources, Inc. v. Trump (2026), the Supreme Court held that the International Emergency Economic Powers Act (IEEPA) does not authorize the President to impose tariffs. The decision invalidated tariffs that had been imposed under IEEPA on imports from several trading partners.  The Court emphasized that tariff authority is fundamentally a congressional power and declined to interpret IEEPA’s general authority to "regulate importation" as permitting the imposition of import duties.

Importantly for companies, the decision does not eliminate tariffs as a policy tool. Instead, it limits the use of IEEPA while leaving other statutory authorities intact, including:

• Section 232 (national security tariffs);
• Section 301 (tariffs responding to unfair trade practices); and
• Traditional trade‑remedy measures.

In the immediate aftermath of the decision, the Administration has turned to Section 122 of the Trade Act of 1974, which allows temporary import surcharges for up to 150 days, as an interim source of tariff authority.

Why the Decision Matters for Existing Trade Arrangements

For most existing arrangements, the Supreme Court’s decision does not automatically invalidate the underlying deals. Instead, it affects the tariff instruments that supported those arrangements.

Many second‑term arrangements contain two layers:

1. a tariff measure (such as a tariff suspension, quota, or threatened tariff action); and
2. a negotiated understanding involving commitments related to purchases, market access, or regulatory cooperation.

The Court’s ruling primarily affects the first layer. If the tariff tool that created leverage is removed or replaced, the economic balance of the arrangement may shift, even if the diplomatic commitments technically remain in place.

The Administration’s current reliance on temporary Section 122 tariffs is therefore important because those tariffs can affect multiple trading partners simultaneously while the government considers longer‑term tools such as Section 232 or Section 301.

Deal‑by‑Deal Implications

The table below summarizes the principal terms of recent arrangements and the potential tariff effects of the shift from IEEPA tariffs to temporary Section 122 measures.

A structural feature of the Administration’s current approach also deserves emphasis. Unlike earlier tariff actions that targeted specific countries or sectors, Section 122 tariffs, if applied broadly, can affect imports from many trading partners simultaneously.

Because Section 122 authorizes temporary import surcharges on a global basis, its use can shift the economic balance across multiple bilateral arrangements at once. As a result, even deals not originally negotiated around emergency tariffs may experience indirect effects during the 150‑day period while the United States evaluates more durable statutory tools such as Section 232 or Section 301.

A. Japan

The bilateral understandings reached during the Administration’s second term were primarily sectoral and focused on avoiding escalation of auto tariffs while expanding agricultural market access. Core elements included:

• Automobile tariffs maintained at existing MFN levels. The United States maintained its baseline tariff rates on Japanese autos (2.5% on passenger vehicles and 25% on light trucks) and did not impose the threatened Section 232 auto tariffs.
• Suspension of potential Section 232 auto tariffs. The United States agreed not to proceed with proposed national‑security tariffs that could have raised auto duties to roughly 25%.
• Agricultural concessions by Japan. Japan expanded tariff‑rate quotas and reduced tariffs for certain U.S. agricultural exports, including beef, pork, wheat, and dairy products.
• Industrial and digital trade cooperation. The governments committed to cooperation on digital trade standards, industrial supply chains, and regulatory transparency.

Because the core leverage in the U.S.–Japan discussions involved the potential use of Section 232 auto tariffs, the invalidation of IEEPA tariffs does not directly alter the tariff structure underlying the arrangement. However, the Administration’s reliance on Section 122 tariffs could temporarily affect Japanese exports. For example, a 10% Section 122 surcharge would raise the effective tariff burden on Japanese passenger vehicles from 2.5% to roughly 12.5% during the 150‑day period, potentially shifting the economic balance of the arrangement while policymakers consider longer‑term tools such as Section 232.

B. China

U.S.–China trade understandings during the Administration’s second term built on the existing Section 301 tariff framework and related negotiated commitments. Core elements included:

• Continuation of Section 301 tariff schedules. Tariffs ranging from 7.5% to 25% remained in place on large volumes of Chinese imports.
• Purchase commitments. China committed to expanded purchases of U.S. agricultural, energy, and manufactured goods.
• Intellectual property and technology transfer commitments. The arrangement included commitments relating to IP protection, forced technology transfer, and regulatory transparency.
• Consultation and enforcement mechanisms. Both governments established consultation processes intended to address disputes over implementation.

Again, because the Supreme Court decision addressed tariffs imposed under IEEPA, most existing Section 301 tariffs remain unaffected. However, the addition of temporary Section 122 tariffs could increase the effective tariff burden. For example, goods currently subject to a 25% Section 301 tariff could face an effective rate of roughly 35% if a global 10% Section 122 surcharge is layered on top during the temporary period.

C. European Union

Recent transatlantic trade arrangements have focused on metals trade and industrial cooperation. Core elements have included:

• Replacement of Section 232 tariffs with tariff‑rate quotas. EU steel and aluminum exports may enter the United States duty‑free up to specified quota levels.
• Retention of tariffs above quota levels. Imports exceeding those quotas remain subject to 25% tariffs on steel and 10% tariffs on aluminum.
• Suspension of retaliatory tariffs. The EU suspended countermeasures previously imposed in response to U.S. metals tariffs.
• Cooperation on industrial policy and supply chains. The parties agreed to coordinate on issues such as steel overcapacity and supply‑chain resilience.

Because these arrangements rely on Section 232 authority, the Supreme Court’s invalidation of IEEPA tariffs does not directly affect them. However, the Administration’s use of Section 122 tariffs could effectively reintroduce duties on imports currently entering duty‑free under quota arrangements. For example, a 10% Section 122 surcharge applied within quota volumes would temporarily raise the tariff rate from 0% to 10% on affected imports.

D. India

U.S.–India arrangements during the Administration’s second term were incremental and issue‑specific rather than comprehensive. Key elements included:

• Targeted tariff adjustments and dispute resolution involving specific industrial and agricultural products.
• Market‑access commitments addressing regulatory barriers affecting U.S. exports.
• Supply‑chain and strategic cooperation in sectors such as pharmaceuticals, semiconductors, and critical minerals.
• A continuing negotiation framework rather than a finalized comprehensive agreement.

Most Indian exports enter the United States under relatively low MFN tariffs (generally below ~5%). Temporary Section 122 tariffs could therefore have a proportionally larger impact. For example, a 10% surcharge could double or triple effective tariff rates on certain goods during the 150‑day window while policymakers evaluate longer‑term measures such as Section 301 investigations.

E. United Kingdom

Following Brexit, the United States and the United Kingdom pursued a series of sector‑specific understandings rather than a comprehensive free trade agreement. Core elements included:

• Metals trade discussions aimed at replacing Section 232 tariffs with quota‑based mechanisms.
• Agricultural market‑access negotiations addressing tariff and regulatory barriers.
• Regulatory and standards cooperation in key industrial sectors.
• An ongoing negotiation pathway toward deeper trade integration.

Because most UK exports face relatively low MFN tariffs (often below ~3%), the economic impact of policy changes tends to arise from temporary surcharges rather than baseline tariffs. A 10% Section 122 tariff applied globally could temporarily raise effective tariffs on many UK exports to roughly 10–13% during the 150‑day period.

F. Canada and Mexico

Trade with Canada and Mexico is governed primarily by the United States–Mexico–Canada Agreement (USMCA). Core provisions include:

• Duty‑free trade for qualifying goods that meet USMCA rules‑of‑origin requirements.
• Automotive rules of origin requiring higher North American content thresholds.
• Agricultural market‑access commitments maintaining largely open agricultural trade across the region.
• Formal dispute‑settlement procedures for resolving trade disagreements.

The tariffs invalidated in Learning Resources v. Trump included 25% duties on many Canadian and Mexican imports imposed under IEEPA, meaning the Supreme Court decision directly removes those tariffs. However, if the Administration applies Section 122 tariffs globally, goods that normally enter duty‑free under USMCA could temporarily face 10% tariffs during the 150‑day period, potentially creating short‑term friction within North American supply chains.

Practical Guidance for Companies

The shift away from IEEPA tariffs and toward alternative statutory tools creates both short‑term uncertainty and new strategic considerations for companies engaged in international trade. 

Businesses should consider the following practical steps.

1. Map tariff exposure across supply chains

Companies should conduct a comprehensive review of their tariff exposure across key sourcing markets. This includes identifying:

• products currently subject to Section 301 tariffs or other trade remedies;
• goods that previously faced IEEPA tariffs that have now been invalidated; and
• imports that could be affected by temporary Section 122 surcharges.

Understanding where tariff exposure exists - and which statutory authority supports the duty - will be essential for anticipating how the policy landscape may evolve.

2. Evaluate potential refund opportunities

Where companies paid tariffs that have now been invalidated under Learning Resources v. Trump, importers should evaluate whether they may be entitled to refunds of previously paid duties.  Possible avenues may include:

• Administrative protests filed with U.S. Customs and Border Protection;
• Participation in existing litigation; or
• Protective filings designed to preserve refund rights while legal issues continue to develop.

Companies should work with counsel to ensure that relevant deadlines for protests or refund claims are not missed, particularly where entries remain within the statutory protest period.

3. Reassess supply‑chain sourcing strategies

Temporary Section 122 tariffs and the potential expansion of Section 232 or Section 301 actions may affect sourcing decisions. Companies should evaluate whether supply chains concentrated in particular jurisdictions could face heightened tariff volatility in the coming months.

In some cases, firms may wish to consider:

• Diversifying sourcing across multiple jurisdictions;
• Evaluating whether products qualify for USMCA rules‑of‑origin benefits; or
• Exploring tariff engineering or classification strategies where appropriate.

4. Revisit contract allocation of tariff risk

Given the likelihood of continued tariff changes, companies should review commercial agreements to ensure that tariff risk is clearly allocated between buyers and sellers.

Key provisions may include:

• Price‑adjustment clauses triggered by tariff changes;
• Force‑majeure or change‑in‑law provisions;
• Allocation of responsibility for customs duties under applicable Incoterms; and
• Mechanisms for renegotiating pricing if trade policy shifts significantly.

Clear contractual allocation can help prevent disputes if tariff rates change during the life of a transaction.

5. Monitor emerging investigations and policy signals

Because future tariff actions are likely to rely on Section 232 or Section 301 investigations, companies should monitor early signals of government action, including:

• Federal Register notices announcing investigations or requests for comment;
• Statements from the Office of the U.S. Trade Representative or the Commerce Department;
• Congressional hearings or legislative proposals affecting trade authorities.

Recent announcements of new Section 301 investigations - spanning multiple sectors linked to supply-chain resilience and strategic industrial policy - suggest that the Administration may be preparing to rely more heavily on that authority in the post-Learning Resources environment as it evaluates longer-term tariff tools to replace IEEPA-based measures.

Conclusion

The practical significance of Learning Resources v. Trump lies less in the elimination of tariffs than in the disruption of the tariff framework that supported several recent U.S. trade arrangements.

Many second‑term deals were negotiated around the possibility - or reality - of IEEPA‑based tariffs. By removing that authority, the Supreme Court altered the leverage that originally produced those agreements. In most cases, the diplomatic understandings themselves remain intact, but the tariff conditions surrounding those arrangements may change materially.

The Administration’s current reliance on Section 122 tariffs. Temporary surcharges imposed under that authority can affect imports from multiple trading partners at once, potentially changing the economic balance of arrangements with Japan, China, the European Union, India, the United Kingdom, and North American partners.

Over time, the United States may transition to more durable tariff tools such as Section 232 or Section 301 investigations, which could again reshape the tariff landscape associated with these agreements. Recently announced new broad-scope Section 301 investigations support this proposition.

For companies operating in international supply chains, the key implication is that existing trade deals may continue to exist but operate under different tariff conditions. Monitoring how the government replaces IEEPA‑based leverage - and how trading partners respond - will therefore be critical for anticipating future trade costs and supply‑chain risks.

Click here to read our previous alert titled “IEEPA Tariffs Struck Down: What the Supreme Court’s Ruling Means for Importers, Refunds, and New Trade Uncertainty”.