From IEEPA to Section 122: What a tariff reset means for Asia

The Supreme Court’s decision to strike down the reciprocal IEEPA tariffs could materially reshape the trade policy landscape. In response, US President Donald Trump swiftly announced the introduction of a 15% across‑the‑board tariff under Section 122, following an initial 10% surcharge that was raised to 15% on 22 February.

Under the new structure, the Section 122 tariff applies broadly to all imports, with several key exceptions. Products already subject to Section 232 duties – such as steel, aluminium, copper, lumber, and automobiles – are excluded to the extent that existing 232 tariffs remain in force. Approximately 1,100 product codes are fully exempt from the surcharge.

Switching from the old IEEPA system to a flat 15% Section 122 tariff clearly creates winners and losers among the top US import partners. The biggest winners are countries that were previously hit with high IEEPA rates. They now see those heavy surcharges replaced by a much lower, uniform tariff.

From a regional perspective, the removal of IEEPA tariffs represents a clear positive for Asia. China and India benefit the most, with tariff cuts of 7.1 points and 5.6 points, respectively. In their case, the new 15% rate is far better than the steep, country‑specific IEEPA tariffs they had been facing previously.

Industries that were most heavily impacted by IEEPA measures show the sharpest decline in tariff incidence. These sectors, where Asia holds a strong global market share, include:

• Apparel
• Toys, games and sports
• Furniture, lighting
• Electrical machinery
• Aircraft

For these categories, the gap between earlier IEEPA tariffs and the new 15% surcharge is particularly large, resulting in a meaningful improvement in export competitiveness for key Asian producers.

China stands to gain meaningfully from the removal of IEEPA tariffs, as this materially reduces its trade‑weighted tariff burden compared with the previous regime. While tariff pressure does not disappear entirely – China still faces a substantial set of duties under other US trade actions – the shift lowers China’s overall effective rate.

China continues to be subject to a wide range of non‑IEEPA tariffs, including:

• Section 301 tariffs, aimed at addressing unfair trade practices, range from 7.5% to 100% depending on the product category.
• Section 232 tariffs, imposed on national security grounds, range from 10% to 50% across steel, aluminium, and related sectors.

Taken together, these tariffs still cover roughly 30% of US imports from China, which is far from insignificant.

Even with those layers still intact, the IEEPA rollback is a meaningful positive. It lowers China’s average tariff load, helps restore some price competitiveness (especially in consumer goods), and introduces upside potential for China’s export momentum in the near term. There’s also a decent chance this shift triggers front‑loading, as Chinese exporters may try to ship more goods quickly to lock in the lower tariff exposure while they can. The broader US-China trade backdrop remains fragile, but for now, the tariff landscape is clearly more favourable for China.

The removal of elevated IEEPA tariffs delivers a significant reduction in India’s effective tariff burden. President Trump had already lowered the punitive 50% tariff on India to 18%, and the elimination of IEEPA surcharges takes this relief a step further. Earlier this month, India and the US issued a joint statement announcing an interim trade deal, though the detailed terms are still being negotiated.

In this context, the Supreme Court ruling arguably improves India’s negotiating position. With the IEEPA threat now off the table, India gains more room to re‑examine elements of the interim agreement that may have been difficult to accept previously. The shift also eases pressure on sectors that had been vulnerable to punitive IEEPA treatment, providing India with a bit more leverage – and breathing space – as talks continue.

The move to a flat 15% Section 122 surcharge sharply reduces Southeast Asia’s tariff burden and boosts its price competitiveness. It’s an especially important outcome for Vietnam, which relies heavily on export-led growth; this is all the more important given that Vietnam is now the third-largest Asian exporter to the US.

Vietnam’s strong export showing in 2025 already highlighted how firmly it has embedded itself in global supply chains. The latest tariff changes reinforce that momentum, positioning Vietnam even more favourably as a key production base for US-bound goods. A big part of this advantage comes from the structure of its exports. Vietnam’s shipments are heavily weighted toward apparel, footwear, toys, and other low-value-added consumer goods – precisely the categories that were disproportionately penalised under the old IEEPA framework. With those higher tariffs now gone, Vietnam’s competitive edge widens further, both regionally and globally.

Japan and South Korea see far less upside from the tariff reset because they never faced meaningful IEEPA surcharges in the first place. With their starting point already low, shifting to a flat 15% Section 122 rate offers virtually no improvement – and in practice, their trade‑weighted tariff rates actually edge higher as the uniform tariff replaces the more favourable, differentiated treatment they previously enjoyed.

Both countries have also entered into large strategic investment agreements with the US, committing substantial capital in exchange for improved tariff treatment and market access. The key question now is whether these investment plans will proceed as agreed. Our view is that the Supreme Court ruling is unlikely to derail them. Crucially, the ruling does not affect the Section 232 tariff relief that Japan, in particular, values highly. With those benefits still intact, the broader US-Japan and US-Korea economic frameworks should remain stable.

In short, while Japan and South Korea gain little from the shift away from IEEPA on a pure tariff basis, the underlying trade and investment relationships they have built with Washington are strong enough to remain on course.