How the Termination of Section 122 Tariffs Impacts Your Supply Chain

Section 122 tariffs expired on July 24, 2026. But what replaced them, and how will those new tariffs affect your import costs?

Z2 Staff

8 min read
How the Termination of Section 122 Tariffs Impacts Your Supply Chain

Article Highlights:

  • What comes after Section 122 tariffs expired? The U.S. Trade Representative (USTR) had spent months building a replacement using Section 301 authority, and these new tariffs are tied to findings that dozens of trading partners failed to adequately prevent forced labor in their supply chains, or did not sufficiently enforce existing bans on the practice.
  • These new tariffs apply a two-tier structure across roughly 60 nations, including a 10% tariff on countries the USTR found had taken partial steps toward enforcing anti-forced labor laws, and a 12.5% tariff on countries found to have made no meaningful effort to police forced labor practices.
  • The shift from Section 122 to Section 301 tariffs is a good example of why sourcing and procurement professionals need to stay nimble and responsive to the current global trade environment. These teams should be carrying out a number of risk management steps right now.

At 12:01 a.m. ET on July 24, 2026, the Section 122 tariffs officially expired. For five months, this import surcharge imposed a flat 10% rate on nearly every product entering the United States. Its termination doesn't mean a return to lower—or necessarily simpler—tariffs, though. Within an hour of the expiration of the Section 122 tariffs, the Trump administration implemented a new Section 301 tariff regime. And for many supply chain and procurement teams, the specific cost of the duty burden barely moved.

But if your organization sources raw materials, components, or finished goods internationally, you still have a legal responsibility to understand exactly what did change on July 24. Knowing the nuances of the transition from Section 122 to Section 301 is essential for avoiding costly compliance mistakes and unplanned cost increases.

How We Got Section 122 Tariffs

The Section 122 tariffs were never intended to be permanent. They emerged directly out of a legal vacuum. On February 20, 2026, the U.S. Supreme Court ruled in Learning Resources, Inc. v. Trump that the International Emergency Economic Powers Act (IEEPA) did not authorize the president to impose the broad "reciprocal" tariffs that had been in place since April 2025. Within hours, however, the administration found a way to mount a response. They invoked Section 122 of the Trade Act of 1974, imposing a 10% global import surcharge that became effective on February 24.

Unlike IEEPA, though, Section 122 comes with hard statutory guardrails. The act can only be invoked to impose a maximum rate of 15% on imported goods, and it can only last for a maximum of 150 days, or roughly five months. Any extension to this timeline must be carried out by Congress.

That 150-day clock ran out on July 24, 2026; suffice it to say, Congress never acted to extend it. In addition, a May 7, 2026 Court of International Trade ruling found that the Section 122 tariffs exceeded presidential authority. But that judicial relief only applied to the three named plaintiffs in the case, leaving the surcharge in effect for everyone else until it expired in July.

What's Replacing the Section 122 Tariffs?

What comes after Section 122 expired is the part of this messy trajectory that supply chain teams can't afford to miss—because it didn't create a tariff-free trade environment. The U.S. Trade Representative (USTR) had spent months building a replacement using Section 301 authority. These new tariffs are tied to findings that dozens of trading partners failed to adequately prevent forced labor in their supply chains, or did not sufficiently enforce existing bans on the practice.

While a chorus of critics has accused the Trump administration of using forced labor accusations as a pretense to bring back its tariff regime, such speculations have no impact on the current trade realities. The Section 301 tariffs took effect the same moment the Section 122 duties expired. These new tariffs apply a two-tier structure across roughly 60 nations:

  • A 10% tariff on countries the USTR found had taken partial steps toward enforcing anti-forced labor laws.
  • A 12.5% tariff on countries found to have made no meaningful effort to police forced labor practices.

Some regions will receive special treatment by the U.S. The European Union and Taiwan have a cap of 10% on all tariffs imposed by the U.S., while Japan, South Korea, and Switzerland are capped at 12.5%. Brazil, meanwhile, is now subject to a separate 25% Section 301 tariff that took effect on July 22, ahead of the broader transition. And unlike Section 122, Section 301 duties carry no statutory rate ceiling and no built-in expiration date. This is an important distinction for U.S. importers, and one that should be taken into account when making supply chain decisions. The federal government can raise the current Section 301 tariffs as high as they want, and there's no ticking clock. Unless the courts step in, this tariff infrastructure is not dissolving anytime soon.

The End of Section 122 Tariffs Doesn't Guarantee Lower Costs

On paper, the switch from Section 122 to Section 301 looks like it could be favorable to U.S. importers. Analysts estimate that the average effective U.S. tariff rate could fall from roughly 13%, under Section 122, to around 7% with the new Section 301 regime. But that stark difference does not apply equally across all U.S. trading partners.

Nations that were pegged with the 12.5% Section 301 tier—which reportedly include major manufacturing hubs across Southeast Asia—may see little to no decrease at all from the Section 122 burden. In some cases, they may ultimately be faced with a higher effective duty rate than the one they carried under Section 122.

Products already subject to Section 232 tariffs, including aluminum, steel, copper, lumber, and automobiles, were excluded from Section 122 and remain governed by that separate regime. In other words, they are not impacted by this transition.

Goods entering duty-free under the U.S.-Mexico-Canada Agreement (USMCA) also remain exempt. For everything else, the termination of Section 122 tariffs effectively converts a blunt, uniform surcharge into a more targeted, country-specific tariff structure. And while the ultimate upshot may be a lower tariff rate for many countries, being able to definitively draw that conclusion requires a granular examination of the new duties.

What Supply Chain Teams Should Do Now

The shift from Section 122 to Section 301 tariffs is a good example of why sourcing and procurement professionals need to stay nimble and responsive to the current global trade environment. These teams should be carrying out the following steps right now:

  • Map country-of-origin (COO) exposure at the component level.
    With duty rates now varying by country and compliance tier rather than applying uniformly, teams need visibility into exactly where every component and sub-assembly in their BOM is coming from. This visibility must also extend beyond the country where final assembly took place and to the sites where the semiconductors were manufactured (country of diffusion, or COD).
  • Reassess total cost for every affected sourcing region.
    Because Section 301 duties can combine with existing most-favored-nation rates in some cases and stack independently in others, the same country may carry a different effective tariff rate than it did under Section 122. Teams should be carefully recalculating their total import burden now that the Section 301 tariffs are officially in force.
  • Track ongoing litigation and legislative activity.
    The Federal Circuit appeal over the legality of the original Section 122 tariffs is still pending, and Congress has introduced legislation that would restrict executive tariff authority going forward. Either development could reshape the compliance landscape again, nullifying the current tariff regime or forcing the Trump administration to replace it yet again. In either case, companies will need to respond, potentially with little warning.

Building Resilience Beyond the Next Tariff Change

The termination of Section 122 tariffs is unlikely to be the last major shift in U.S. trade policy while the Trump administration is in office. In fact, it's fairly likely that it isn't even the last significant change to happen to trade in 2026.

Between pending court rulings, active Section 301 investigations, and legislative proposals aimed at curbing executive tariff authority, supply chains may face yet more volatility ahead. Procurement teams operating in this unstable, unpredictable trade environment need to be able to respond quickly and decisively to new developments.

The organizations best positioned to handle this dynamic trade climate are not necessarily the ones reacting the fastest after each announcement. Rather, they're the businesses with real-time visibility into their direct and sub-tier suppliers, access to reliable COO and COD information, and risk data on suppliers, sites, and parts.

How Z2D Helps Teams Navigate Tariff Volatility

Z2Data's suite of supply chain risk management (SCRM) tools gives supply chain resilience teams all this data, as well as the context to act on it appropriately. Using Z2's industry-leading databases and real-time risk monitoring, businesses can model their tariff exposure before policy changes take effect. Instead of scrambling to map BOM-level sourcing risks every time a new tariff regime enters into force, teams leveraging Z2 can see that exposure continuously.

To learn about how Z2 helps businesses understand their tariff exposure and calculate costs, schedule a free trial with one of our product experts.