Initial Reaction to New Tariffs Muted as Lawyers Assess Legality

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Written by John Egan for IIR News Intelligence (Sugar Land, Texas)

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Summary

Global response has been muted so far to President Donald Trump's proclamation of a new set of tariffs on most goods produced by nearly every country in the world, in response to an adverse ruling from U.S. Supreme Court a week ago. Aside from legal challenges that are said to be under consideration, the rest of the world seems to have taken a "wait-and-see" approach.

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Trump's Reaction: Swift and Loud

President Donald Trump had an immediate, loud, angry and unprecedented response last Friday to the U.S. Supreme Court decision striking down his use of a 1970s-era law to justify his deep and broad tariff regime against most goods produced by most countries in the world.

Trump called the 6-3 ruling "deeply disappointing" and "a terrible decision," adding he was "ashamed of certain members of the court," calling them "fools and lapdogs for the (Republicans in name only) and the radical left Democrats." He singled out the three justices in the majority appointed by Democrat presidents as "a disgrace to the nation," but had nothing to say about the other three justices in the majority, who were appointed by Republican presidents, including himself.

For more on the decision, see February 20, 2026, article - Supreme Court Rejects Trump Tariffs under IEEPA.

Historians said that a presidential verbal attack on members of the court was unprecedented.

At his February 20 press conference, the president said he'd replace the struck-down tariffs that were based on the International Emergency Economic Powers Act (IEEPA) with a new 10% across-the-board global tariff that relied on Section 122 of the Trade Act of 1974, a law passed by Congress after President Richard Nixon delinked the U.S. dollar from gold. He later said he would raise tariffs to 15%, though that hasn't been made official yet through a presidential executive order or proclamation.

For 30 years prior to 1974, all overseas currencies were linked to the U.S. dollar, which in turn was pegged to the price of gold. Going off the gold standard and fixed exchange rates caused an immediate and significant balance-of-payment problem in global trade. In essence, it created a large international accounting problem. The world has since evolved to a system where foreign currencies are repriced each day by investors on a daily basis.

Section 122 gives the president the power to impose tariffs for up to 150 days to address "fundamental international payments problems" and severe, short-term macroeconomic imbalances such as currency depreciation or massive trade deficits. The tariff period can be extended by a congressional vote.

Trump doubled down on his ability to impose tariffs in his State of the Union address to Congress Tuesday night. "One of the primary reasons for our country's stunning economic turnaround--the biggest in history, where the Dow Jones broke 50,000, four years ahead of schedule, and the S&P hit 7,000, where it wasn't supposed to do it for many years--were tariffs," Trump said. "I use these tariffs, took in hundreds of billions of dollars to make great deals for our country, both economically and on a national security basis."

A Subdued Response

Unlike the reaction to Trump's April 2025 "Liberation Day" tariffs, the reaction to this new set of Trump tariffs was muted, both in stock and bond markets and commentary by affected foreign leaders.

Stock-market watchers said investors were more focused on corporate artificial intelligence (AI) announcements and quarterly earnings announcements. Investors had a weekend to consider the impact of a 10% tariff and decided, apparently, it was no big deal, as importing companies have been able to pass along the cost of most of the IEEPA tariffs to customers.

A research paper from the New York Federal Reserve Bank and Columbia University said that businesses and consumers paid about 90% of the IEEPA tariffs last year while exporting countries absorbed the other 10%. The White House has consistently said overseas countries will pay the tariffs, a claim contradicted by a wide range of economists and trade experts.

One reason overseas reaction was subdued was the 10% tariffs under Section 122 were significantly less than what most countries were being charged under the IEEPA tariffs: China's IEEPA levy was set at 34%, India's was 26%, the European Union's was 20% and Canada's was 25%, later increased to 35%, though certain imports, such as energy, were only subject to a 10% levy.

Another reason for the quiet reaction was the long list of imports that Trump exempted from Section 122 tariffs, including but not limited to:

• Certain unspecified critical minerals
• Metals used in currency and bullion
• Energy and energy products
• Natural resources and fertilizers that cannot be grown, mined, or otherwise produced in the United States or grown, mined, or otherwise produced in sufficient quantities to meet domestic demand
• Certain agricultural products, including beef, tomatoes and oranges
• Pharmaceuticals and pharmaceutical ingredients
• Certain electronics
• Passenger vehicles, certain light trucks, certain medium- and heavy-duty vehicles, buses and certain parts of passenger vehicles, light trucks, medium- and heavy-duty vehicles, and buses, and
• Certain aerospace products.

Trade experts said the Section 122 tariffs might scuttle, or at least complicate, trade deals that were announced or in the process of being negotiated, which could add a measure of uncertainty to trade with foreign nations.

Separately, Trump's U.S. Trade Representative Jamieson Greer issued a statement announcing new investigations under another provision of the same statute, Section 301, which authorizes the Office of the United States Trade Representative (USTR) to impose tariffs and other restrictions on countries that engage in unfair trade practices. The USTR statement also noted that Section 232 of the Trade Expansion Act of 1962 remains in force to impose tariffs on a wide range of products, such as steel and cars.

Legal Challenges May be Brewing

The legal community has been slightly more active: In the last week, companies have filed over 1,000 lawsuits at the U.S. Court on International Trade (CIT) seeking refunds for the IEEPA tariffs they paid, according to reports in CNN and the Associated Press. The U.S. government estimated that the IEEPA tariffs collected about $134 billion through mid-December.

The Supreme Court decision striking down those IEEPA tariffs did not address whether the government would have to refund tariffs that has been collected unlawfully, leaving that to the CIT.

When contacted by the news media, many companies and organizations that filed lawsuits against the IEEPA said they were assessing the legal soundness and applicability of the president's use of Section 122 to impose a new global tariff regime. However, the conservative Cato Institute said "these new tariffs almost certainly violate the law."

Congress passed Section 122 to give the president temporary powers when the U.S. found itself in a balance-of-payment crisis, similar to being overdrawn at a bank. That's what happened after Nixon took the U.S. dollar went off the gold standard.

"No president has used (Section 122) until now, so it could be ripe for legal challenges," Luis Arandia, a partner with Washington, D.C., law firm Barnes & Thornburg focused on customs and international trade partners, told CBS News.

CBS News also quoted the non-partisan Congressional Research Service, which analyzes legislation for lawmakers, as saying, "Section 122 has never been used, and therefore courts have had no occasion to interpret its language."

Although the U.S. has long had a trade deficit in goods, it also has run a large surplus in services. The U.S. is the world's largest exporter of services.

But a trade surplus or deficit is not the same as a balance-of-payment deficit, for which Section 122 was passed. Section 122 was passed to address what was effectively an accounting problem, not a trade problem.

"Section 122 is for a balance of payments crisis, which is when you don't have enough foreign reserves to pay external debts," Philip Luck, director of the economics program at the nonpartisan Center for Strategic and International Studies, told CBS News. "The U.S. has a very large trade deficit, but so long as we can continue to sell assets to the global market, we have no challenge conducting international trade."

Key Takeaways

• President Donald Trump on February 20 imposed an across-the-board 10% tariff on imports following his loss at the Supreme Court earlier that day.
• Response has been relatively muted from companies and organizations that had sued to overturn the levies imposed under IEEPA.
The new tariffs, imposed under Section 122 of the Trade Act of 1974, exempted many types of goods, including energy, critical minerals, metals and agricultural products.

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About IIR News Intelligence
IIR News Intelligence is a trusted source of news for the industrial process and energy markets, powered by Industrial Info Resources' Global Market Intelligence (GMI).

About Industrial Info Resources
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 250,000 current and future projects worth $30.2 Trillion (USD).