SCOTUS Strikes Down IEEPA Tariffs as Trump Pivots to Section 122 Duties

The U.S. Supreme Court’s 6-3 decision to strike down tariffs imposed under the International Emergency Economic Powers Act (IEEPA) represents a significant constitutional check on executive trade authority. By ruling these "reciprocal tariffs" illegal, the court has effectively dismantled the legal architecture President Trump used to justify 35% duties on a wide range of goods, including those from Canada, Mexico, and China. For logistics and supply chain professionals, this ruling initially appeared to be a de-escalation of trade tensions, but the subsequent announcement of a 10% global tariff under Section 122 of the 1974 Trade Act has introduced a new layer of complexity and risk.

For Canadian exporters, the immediate fallout of the SCOTUS ruling is surprisingly minimal. Under the existing Canada-U.S.-Mexico Agreement (CUSMA), most Canadian goods were already exempt from the IEEPA-based tariffs. William Pellerin of McMillan LLP noted that because most businesses were not actually paying the 35% rates due to these exemptions, the removal of the illegal duties does not fundamentally change the current cost structure for cross-border trade. However, the ruling is a symbolic victory for the rule of law in trade policy, suggesting that the executive branch cannot use emergency powers as a permanent tool for economic protectionism.

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William Pellerin of McMillan LLP noted that because most businesses were not actually paying the 35% rates due to these exemptions, the removal of the illegal duties does not fundamentally change the current cost structure for cross-border trade.

The pivot to Section 122 of the 1974 Trade Act is the more pressing concern for supply chain strategists. Unlike IEEPA, which Trump utilized for broad, indefinite "emergencies," Section 122 is specifically designed for balance-of-payments emergencies. It allows the President to impose temporary import surcharges of up to 15% for a maximum of 150 days. While this provides a shorter window of disruption, the critical question remains whether the administration will honor CUSMA exemptions under this new authority. If the 10% global tariff is applied without regard to existing free trade agreements, Canadian industries—particularly automotive, steel, and aluminum—could face a sudden and sharp increase in landed costs.

Avery Shenfeld, chief economist at CIBC, has highlighted the "worse off" scenario where the 10% tariff stacks on top of existing sectoral duties or bypasses CUSMA entirely. This uncertainty forces logistics managers into a defensive posture. Companies must now evaluate their customs bonds and pricing contracts to account for a potential 150-day period of heightened costs. Furthermore, the use of Section 122 requires the President to consult with Congress, which may provide a legislative avenue for trade advocates to push back against the duties, though the 150-day "shot clock" often expires before meaningful legislative intervention can occur.

Looking forward, the supply chain industry must prepare for a "whack-a-mole" trade policy environment. As one legal tool is struck down by the judiciary, the executive branch appears ready to cycle through alternative statutes to achieve protectionist goals. The SCOTUS ruling clarifies that the President's power is not absolute, but it does not prevent the administration from testing the limits of other trade laws. For now, the focus shifts from the 35% IEEPA threat to the 10% Section 122 reality, with the 150-day expiration date serving as the next major milestone for market stability.