Trump’s Section 122 Tariff Expires. Its Price Impact May Last Longer.

The 150-day emergency surcharge ends July 24, but its price effects have not fully landed.

Photo by CHUTTERSNAP on Unsplash

A Temporary Tariff

The United States' 10% global import tariff expires July 24, 2026, ending a 150-day surcharge widely noted as the broadest tariff action in recent US trade history. The tariff applies to an estimated $1.2 trillion of annual imports from nearly all countries, accounting for about a third of total US annual imports. The tariff took effect February 24, 2026, under Section 122 of the Trade Act of 1974, with Donald Trump referencing the country's balance-of-payments deficit. Although it was ruled unlawful by the Court of International Trade (CIT) in May 2026, the U.S. Court of Appeals paused the ruling on June 11, 2026, allowing the government to continue administering and collecting the 10% global import tariff. 

The temporary surcharge is on track to be replaced by import tariffs proposed under Section 301 of the Trade Act of 1974. The tariff, currently in its final review stages, targets 60 countries over forced labor import policies. While the Section 122 Tariff is set to expire, its price impact may last longer. 

Tariff Costs Show Up Gradually in Consumer Prices

Between February and November 2025, the US enacted 26 tariff changes on goods ranging from steel, aluminum, and copper to auto parts, and timber, alongside bilateral measures targeting China, the EU, Japan, South Korea, Brazil, and India. The goods most affected were appliances and information processing equipment, where tariff effects were as high as 8%. Most of the price pressure came from tariffs on China and other major Asian markets. 

Research from the New York Fed found that nearly 90% of the economic burden from the tariffs fell on US businesses and consumers. Tracking the tariff changes, The Fed reports that tariff effects on consumer prices cumulated over several months, reaching roughly full dollar for dollar pass-through in seven months. The cumulative tariff effect was significant. Tariffs implemented through November 2025 raised core goods PCE prices by 3.1% by February 2026, accounting for essentially all of the excess inflation in core goods above pre-pandemic levels. 

To put that in context, core goods prices typically fell by about 0.7% annually in the five years before the pandemic disrupted global supply chains. By the Fed's estimate, tariffs explain the gap between that historical trend and what consumers paid since the 2025 tariffs. A July 2026 survey shows that nearly half of firms that directly paid tariffs are yet to pass the full costs to consumers. About 47% of service firms and 44% of manufacturers say that they have price increases in the pipeline. While some firms are held back by long-term contracts and are unable to raise prices immediately, others are gradually raising prices, spreading the tariff cost over time. The result is a tariff burden that moves into consumer prices gradually. 

"Source: Federal Reserve Bank of New York, Regional Business Surveys, May 2026."

The Price Effects of Section 122 Tariffs

The Section 122 tariff lasted five months. This is precisely the lower end of the five to nine month window the Federal Reserve's research estimates for full pass-through of tariff costs. The tariff touched an estimated $1.2 trillion in annual imports. With such a sweeping surcharge, price adjustments are slower and the tariff costs move gradually through supplier contracts, retailer margins, and shelf prices. Hence, the surcharge expires, but the price effects have not fully landed. 

The Yale Budget Lab estimated a consumer price increase of 0.6% and a loss of around $800 per household assuming full pass-through of the tariff costs to consumer prices. This is why the tariff appears less like a trade policy tool and more like a tax on businesses and consumers. Foreign exporters, for the most part, did not lower their prices to absorb the surcharge. The burden fell almost entirely on U.S businesses and consumers. 

From Emergency Measure to Missed Target

The Section 122 10% global tariff was imposed to address what the Trump administration described as "a large and serious balance-of-payments deficit." Trump cited a $1.2 trillion annual goods trade deficit and a 2024 current account deficit of 4% of GDP. On paper, the conditions appeared to be enough justification for invoking a surcharge that had never been used.

But it was widely contested because Section 122 was created for a different era. It was written in 1974 during the Bretton Woods fixed exchange rate system, when countries held fixed exchange rates and a balance of payments crisis meant running out of reserves. Today, exchange rates float freely and adjust automatically, removing the very conditions Section 122 was designed to address.

While the tariff was contested, duties continued to be collected. But 150 days later, the emergency measure appears to have missed its target. The trade deficit the Section 122 tariff was meant to reduce surged to $77.6 billion in May 2026, higher than the $57.3 billion deficit of February 2026 when the tariff took effect. The tariff also failed to deliver any new trade deals or market access for American exporters.

One thing the tariff did not fail to deliver is revenue. The 150 days of Section 122 contributed around $30 billion to federal revenue. The revenue would have been a major milestone, except that it arrived by indirectly raising the costs for U.S businesses and consumers who ultimately bear the economic burden of the tariff.

The Tariff Refunds That Might Never Reach Consumers 

On February 20, 2026, the Supreme Court ruled the IEEPA tariff unlawful, after a year of collection. The ruling struck down both the fentanyl related tariffs Trump imposed on China, Canada, and Mexico in February 2025 and the broader reciprocal tariffs. The court ruled that the emergency powers statute never gave the president authority to bypass Congress and impose tariffs. 

This has led to rounds of refunds on the paid duties of over 53 million shipments, amounting to $166 Billion. As of early July 2026, about $80 billion in tariff refunds have been processed. However, the reversal of the tariff comes after a year when tariff costs have already reached full pass through into consumer prices going by the Fed's estimate.

While the importers are refunded, the consumers who ultimately bore the economic burden might never get the refunds. A few companies have committed to making sure the refunds reach consumers. Costco's CEO said the company would pass any refund back to customers as lower prices. FedEx committed to refunding shippers and consumers who originally bore the tariff charges. But most companies have made no such commitment, and several are now defending consumer class actions accusing them of trying to collect twice, once from consumers through raised prices, and again from the government through refunds.

Much of the $166 billion is unlikely to ever reach the consumers who actually paid higher prices. Most people would not sue the companies that raised prices outside of the existing class actions, and tracing a specific tariff charge through a specific purchase, months later, is difficult. The same thing could play out with the Section 122 tariff. The tariff is still being fought in court, and if the Federal Circuit upholds the ruling that the tariff was illegal, the $30 billion collected has to be paid back, setting up another cycle of refunds. For the vast majority of consumers who bore the cost of both tariffs, the money is unlikely to ever reach them.

The Switch to Section 301 Tariff

The Section 301 tariff was announced by the U.S. Trade Representative on June 2, 2026. This came after an investigation opened in March 2026 into 60 countries on forced labor laws and enforcement. The U.S. law prohibits the trade of goods made with forced labor, a standard, U.S. Trade Representative, Jamieson Greer says “most other countries either lack or fail to enforce." 

The proposed tariff covers 60 countries and has two tariff tiers. It imposes a 10% rate for most goods of 15 trading partners that have adopted or committed to forced-labor prohibitions and a steeper 12.5% rate for up to 45 countries lacking such laws and enforcement. 

Unlike the temporary Section 122 surcharge, the proposed Section 301 tariffs have a long-term structure with a statutory four-year review period. Although the official effective date remains unannounced, the sweeping tariff on the way is estimated to drive the import tariff rate to 12.4%, which is above the 2025 IEEPA level. 

Allianz Research projects the effective rate will rise gradually to 9.3% before reaching the 12.4% ceiling by the fourth quarter of 2026. Hence, the potential price effects of the Section 301 tariffs are also expected to be gradual rather than instant. With the first half of 2025's tariff wave now largely passed through, this next wave of 2026 tariffs is set to create another cycle of inflationary pressure.