New Tariff Landscape After Supreme Court Ruling
President Trump imposed IEEPA tariffs on US trading partners including China, Canada, Mexico, and the EU in 2025. However, the Supreme Court recently ruled in a 6-3 decision in Learning Resources Inc. v. Trump and V.O.S. Selections v. United States that “IEEPA does not authorize the President to impose tariffs.”
Key Data: After the IEEPA tariffs were struck down, President Trump responded by signing an executive order that would impose a 10 percent tariff on all countries under Section 122 with exemptions, effective February 24, 2026. We estimate this new tariff would apply to $1.2 trillion worth (34 percent) of annual imports.
Significant Increase in US Household Tax Burden
According to Tax Foundation analysis, the Trump tariffs in 2025 amounted to an average tax increase per US household of $1,000. After the IEEPA tariffs were struck down, we estimate the President’s remaining new tariffs under Section 232 will increase taxes per US household by $400 in 2026. The Section 122 tariffs will increase this household burden by about $200 to $600 in 2026.
We estimate with the IEEPA tariffs being ruled illegal, the remaining Section 232 tariffs imposed in 2025 increase the weighted average applied tariff rate on all imports to 6.7 percent in 2026, down from 13.8 percent under the IEEPA tariffs. While the 10 percent Section 122 tariffs are in effect, we estimate this rises to 10.3 percent, and then falls to 6.7 percent after the Section 122 tariffs end.
Tariff Revenue and Economic Impact
With the IEEPA being ruled illegal, we estimate that the remaining Section 232 tariffs imposed in 2025 and the 10 percent Section 122 tariffs will raise $660 billion in revenue from 2026-2035 on a conventional basis. The permanent Section 232 tariffs will reduce US GDP by 0.2 percent, before foreign retaliation. Accounting for negative economic effects, the revenue raised by the tariffs falls to $515 billion over the next decade.
We estimate that the Section 232 tariffs raised $36 billion in net tax revenue in 2025. However, the tariffs have not meaningfully altered the trade balance. The total trade deficit fell by only $2.1 billion in 2025, driven by an increase in the trade surplus of services.
Historical Evidence: Tariffs Are Taxes Paid by Consumers
Historical evidence and recent studies show that tariffs are taxes that raise prices and reduce available quantities of goods and services for US businesses and consumers, resulting in lower income, reduced employment, and lower economic output.
In 2025, before the Supreme Court ruled the IEEPA tariffs illegal, the actual average effective tariff rate rose from 2.4 percent in 2024 to 7.7 percent, the highest since 1947. If the 10 percent Section 122 tariffs end after 150 days, we estimate the average effective tariff rate for 2026 will be 5.6 percent—the highest since 1972.
Trade Balance Unaffected
One of President Trump’s stated goals of imposing tariffs is to shrink the US trade deficit. However, a country’s balance of trade is not solely driven by trade policy, but instead reflects broader macroeconomic balances between saving and investment and net lending and borrowing with the rest of the world.
In the United States, domestic investment outpaces domestic saving, requiring a capital inflow from the rest of the world to close the gap. Because tariffs do not directly change the balance between domestic saving and investment, tariffs cannot permanently change the trade balance.
Impact on Global Supply Chains
The tariff war has had profound impacts on global supply chains. According to Tax Foundation data, customs duties raised $264 billion for the federal government in calendar year 2025, compared to $79 billion in calendar year 2024. However, these tariff revenues are partially offset by the mechanical reduction in income and payroll tax bases due to tariffs.
For Chinese export enterprises, uncertainty in US tariff policy increases export risks. Companies need to closely monitor policy changes, adjust export strategies, explore diversified markets, and reduce dependence on single markets.
Future Outlook: Tariff Policy Direction
The Section 122 tariffs are scheduled to expire after 150 days. The direction of tariff policy thereafter remains uncertain. Analysts note that regardless of how tariff policy evolves, businesses should prepare accordingly, including optimizing supply chain layouts, improving product competitiveness, and exploring emerging markets.
For supply chain practitioners, understanding tariff policy changes and their impacts is crucial. Only by accurately grasping policy trends can companies find development opportunities in the complex international trade environment.
Source: Tax Foundation
