Tax Insights: US updates trade framework after Supreme Court ruling

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Issue 2026-09

In brief

What happened? 

On February 20, 2026, in response to the US Supreme Court’s ruling¹ that the US International Emergency Economic Powers Act (IEEPA) does not authorize the President to impose tariffs, US President Donald Trump signed:  

• an executive order² that ends the IEEPA-based tariff measures, including certain reciprocal tariffs and country-specific tariffs previously imposed on Canada, Mexico, China and other countries
• a Proclamation³ that imposes a temporary import surcharge under section 122 of the US Trade Act of 1974 (19 U.S.C. § 2132), effective February 24, 2026 (12:01 am ET), citing “large and serious balance‑of‑payment deficits”

In a related press release, US Trade Representative (USTR) Ambassador Greer acknowledged the US Supreme Court’s decision on the IEEPA-based tariffs and outlined how the US Administration views its authority to adjust tariffs and surcharges following the US Supreme Court’s ruling.

Why is it relevant?

These Presidential actions and the USTR’s views on imposing tariffs could significantly affect the net duty obligations, and pricing and supply chain strategies, of companies importing into the United States.

Actions to consider

Canadian businesses exporting to the United States should assess how the ended tariff actions and new import surcharge affect their products and update cost and pricing models accordingly. They should also review contracts to clarify who is responsible for the surcharge, explore mitigation strategies and monitor ongoing guidance from US authorities.

In detail

Ending certain tariff measures

As a result of the February 20, 2026 executive order, the US Customs and Border Protection (CBP) agency will cease to collect the IEEPA-based tariffs⁴ on goods entered for US consumption or withdrawn from warehouse for consumption on or after 12:00 am ET on February 24, 2026. For more information, see our Tax Insights “US Supreme Court invalidates IEEPA‑based tariffs: Implications for Canadian and multinational businesses”.

Imposing a temporary import surcharge

The February 20, 2026 Proclamation authorizes a broad, time‑limited surcharge on imports, citing balance‑of‑payments and international economic concerns under section 122 of the US Trade Act of 1974. Key provisions of the Proclamation, include:

• a temporary 10% surcharge will apply to US imports from all countries for a period of 150 days – President Trump subsequently indicated that the rate may increase to 15%, which is the maximum rate permitted under section 122; however, no revised Proclamation implementing that increase has yet been issued
• certain goods will not be subject to the surcharge (listed in Annex I and II of the Proclamation), including:
  • Canada-United States-Mexico Agreement (CUSMA)-compliant goods originating from Canada and Mexico
  • certain critical minerals, natural resources, fertilizers and energy products
  • certain agricultural products
  • pharmaceuticals and pharmaceutical ingredients
  • certain electronics, aerospace products, passenger vehicles and vehicle parts
  • informational materials, donations and accompanied baggage
  • textile and apparel articles under the Dominican Republic-Central American Free Trade Agreement (CAFTA-DR)
  • goods that are (or may become) subject to section 232 tariffs of the US Trade Expansion Act of 1962 (19 U.S.C. § 1862)
• the surcharge does not "stack" on top of the section 232 tariffs; when a section 232 tariff applies to an import, the surcharge applies only to the portion not covered by section 232
• goods in transit (loaded and in transit before February 24, 2026 [12:01 am ET], and entered before February 28, 2026 [12:01 am ET]) are exempt
• goods admitted to a US foreign trade zone (FTZ) on or after February 24, 2026 (12:01 am ET) must be admitted as "privileged foreign status”
• the surcharge is treated as a regular customs duty, which may permit drawback; importers should verify their eligibility with, or await guidance from, the CBP

The temporary import surcharge will also apply to low-value shipments of goods, including goods shipped through the international postal system. In a separate executive order,⁵ President Trump continued the suspension of duty-free de minimis treatment for all countries.⁶ The de minimis suspension remains in effect independently of the section 122 surcharge and will continue regardless of any legal challenges to other tariff trade actions.

Other trade actions

The Office of the USTR announced that it will initiate several section 301 investigations (under the US Trade Act of 1974) at President Trump’s direction to address “certain unreasonable and discriminatory acts, policies, and practices that burden or restrict U.S. commerce” by many trading partners. These investigations will cover most major trading partners and “address areas of concern such as industrial excess capacity, forced labor, pharmaceutical pricing practices, discrimination against U.S. technology companies and digital goods and services, digital services taxes, ocean pollution, and practices related to the trade in seafood, rice, and other products.” 

The USTR stated that it will conduct these investigations “on an accelerated timeframe” and that “[i]f these investigations conclude that there are unfair trading practices and that responsive action is warranted, tariffs are one tool that may be imposed.” The USTR also stated that it will continue ongoing section 301 investigations, including those involving Brazil and China, and will maintain tariffs currently imposed under section 232 of the US Trade Expansion Act of 1962 and conclude ongoing investigations.

Implications for Canadian businesses and US importers

For Canadian businesses, the CUSMA exemption from the new import surcharge creates a competitive advantage over non-CUSMA competitors, who now face a 10% cost increase on US imports. Canadian exporters should leverage this positioning while it lasts. However, Canadian goods that do not meet CUSMA-origin requirements will be subject to the 10% surcharge and, for all Canadian businesses, the section 232 tariffs on steel, aluminum and certain other products remain in effect.

For US importers, the net duty impact depends on the commodity type and the country of origin. Some importers will benefit from IEEPA tariff relief, while others may face higher costs under the new import surcharge. All importers who paid IEEPA-based tariffs should evaluate refund opportunities, although the CBP agency has not yet issued formal guidance on the refund process. The 150-day statutory limit on the section 122 authority creates a defined but temporary planning window, with longer-term tariff policy dependent on the outcomes of trade investigations (e.g. the section 301 and section 232 investigations).

For importers with goods in bonded warehouses or FTZs, the import surcharge that applies is based on the date of withdrawal for consumption, not the date of physical entry. This creates potential planning opportunities or risks, depending on applicable rates and exemption eligibility.

Canadian businesses and US importers should:

• map current (and forecasted) imports to products and countries that are affected by the ended IEEPA-based tariff actions, as compared to the new section 122 import surcharge
• model the net duty impact (i.e. tariff savings versus import surcharge cost) and update landed‑cost, transfer pricing and customer pricing models
• review contracts (i.e. incoterms, duty‑sharing, pricing adjustment clauses) to determine who bears the new import surcharge
• evaluate mitigation options (e.g. tariff classification, origin planning, CUSMA and other free trade agreements, customs valuation strategies, supply chain shifts)
• review potential recovery and exposure for goods in bonded facilities and FTZs
• monitor the USTR and US Treasury for further guidance on how they will implement Presidential actions and the US Supreme Court’s IEEPA decision

The takeaway

Canadian businesses that export CUSMA-compliant goods will continue to benefit from the CUSMA with respect to the new import surcharge, subject to compliance with applicable origin and documentation requirements. As the section 122 import surcharge is limited to 150 days without congressional action, the longer-term tariff landscape will depend on the outcomes of the USTR’s section 232 and 301 investigations and any congressional response. Businesses should monitor these developments and prepare changes to their trade-related policies accordingly.