• President Trump raised the Section 122 global import surcharge from 10% to 15% following a Supreme Court ruling that blocked tariff authority under IEEPA, with the measure effective February 24–July 24, 2026.
• Critical minerals, energy, pharmaceuticals, and USMCA goods remain exempt from the 15% surcharge, protecting rare earth inputs while increasing costs for processing equipment and industrial buildout.
• Despite nearly a year of tariff expansion, structural trade metrics show no material improvement, raising questions about whether tariffs function as an embedded input tax that strengthens the dollar and widens deficits.

Updated February 21, 2026

Highlights

• Following a 6–3 ruling by the Supreme Court of the United States that IEEPA does not authorize presidential tariffs, President Trump imposed a temporary global import surcharge under Section 122 of the Trade Act.
• Initially set at 10%, the President announced on Saturday February 21 that the rate will increase to the full 15% allowed under Section 122.
• The measure takes effect February 24, 2026, and runs through July 24, 2026, unless extended by Congress.
• Critical minerals, energy, pharmaceuticals, USMCA goods, and items under Section 232 remain exempt — preserving key rare earth inputs.
• The economic effectiveness of Section 122 remains unproven, with structural trade metrics showing no material improvement after nearly a year of tariff expansion.

From 10% to 15%: A Rapid Escalation

In a swift statutory pivot following the Court’s decision limiting tariff authority under the International Emergency Economic Powers Act (IEEPA), President Donald Trump issued a Presidential Proclamation invoking Section 122 of the Trade Act of 1974 (19 U.S.C. §2132).

The original proclamation reported on by Rare Earth Exchanges™ imposed a 10% ad valorem surcharge on most imports.

Now today, Saturday, February 21, the President announced that the rate would be raised to the fully authorized 15% level, stating that the administration would utilize the maximum rate permitted under the statute.

Section 122 allows:

• Up to 15%
• For up to 150 days
• In response to “fundamental international payments problems”
• Unless extended by Congress

The surcharge takes effect 12:01 a.m. EST on February 24, 2026, and runs through 12:01 a.m. EDT on July 24, 2026. This is not emergency improvisation. It is statutory repositioning.

The Legal Reset: What the Supreme Court Actually Did

The Court did not strike down tariffs broadly. It held that IEEPA does not authorize the President to impose tariffs.

Congress, however, has delegated tariff authority under multiple statutes:

• Section 232 (national security)
• Section 301 (unfair trade practices)
• Section 122 (balance-of-payments stabilization)

Section 122 now becomes the active instrument.

The administration’s justification rests on macroeconomic indicators cited in the proclamation:

• ~$1.2 trillion annual goods trade deficit
• ~4.0% current account deficit
• Net international investment position near –90% of GDP
• Primary income balance turning negative

The argument is balance-of-payments stabilization — not geopolitical retaliation.

Scope and Strategic Exemptions

The 15% surcharge applies broadly to all articles imported into the United States, subject to Annex-based exclusions.

Structural features:

• Applies in addition to existing duties
• Does notstack on Section 232 tariffs
• Applies only to the non-232 portion of imports
• Treated as a regular customs duty under HTSUS authority

Major Exemptions

• Certain critical minerals
• Energy and energy products
• Pharmaceuticals and APIs
• Passengervehicles and select auto parts
• Certain electronics
• Aerospace products
• USMCA-compliant Canada and Mexico goods
• Goods already subject to Section 232

For rare earth markets, the exemption for “certain critical minerals” is the pivotal safeguard. Final scope depends on Annex classification.

Rare Earth Implications: Shielded Inputs, Higher Ecosystem Costs

Raw rare earth and critical mineral inputs appear protected.

However:

• Processing equipment
• Specialized machinery
• Separation chemicals
• Non-exempt industrial inputs

now face up to a 15% surcharge, increasing capital buildout costs for U.S. ex-China supply chain ambitions.

The inputs are buffered. The ecosystem is not.

Stress-Test: Does Section 122 Solve the Problem It Cites?

Section 122 is explicitly tied to balance-of-payments correction. Its economic logic depends on three channels.

1. Import Compression

Higher prices may reduce import volume.

But if demand is inelastic — energy, strategic inputs, industrial components — the value of imports may not fall proportionally.

At 15%, compression is stronger than at 10%, but elasticity remains uncertain.

2. Currency Effects

In theory, reduced imports narrow the trade deficit.

In practice, tariffs can strengthen the dollar by tightening financial conditions and reducing capital outflows.

A stronger dollar makes exports less competitive — widening trade deficits.

This currency channel often overwhelms tariff effects.

3. Domestic Substitution

Higher import costs can incentivize reshoring.

However:

• Permitting cycles
• Infrastructure buildout
• Workforce training
• Capital allocation

operate on multi-year horizons.

A 150-day policy window is a signal — not a structural solution.

Net Assessment

Section 122 is a temporary shock tool.

It can:

• Alter marginal trade flows
• Create negotiating leverage* Signal seriousness

It cannot, by itself:

• Reverse structural savings-investment imbalances
• Repair a deeply negative NIIP
• Redesign industrial capacity

Tariffs modify flows. They do not alter macro fundamentals.

A Sharper Macro Question: Are Tariffs Helping — Or Hurting?

Nearly a year after the broader “Liberation Day” tariff framework began, key structural indicators have not materially improved.

Some data suggest deterioration.

Two interpretations withstand scrutiny:

Case A: Adjustment Lag

Industrial realignment requires time. Trade deficits do not compress instantly. Manufacturing cycles are multi-year. Data may reflect lag effects.

Case B: Embedded Input Tax

Tariffs raise input costs for domestic producers reliant on global supply chains.

Higher costs can:

• Compress margins
• Dampen investment
• Increase consumer prices
• Tighten financial conditions
• Strengthen the dollar

If dollar appreciation offsets import compression, trade deficits may widen.

At 15%, these input pressures intensify. The verdict is not ideological. It is empirical. And so far, evidence of structural improvement is limited.

The Three-Layer Trade Architecture

The United States now operates under:

• Section 232 — national security metals
• Section 301 — China enforcement
• Section 122 — global balance-of-payments surcharge

This is statutory stacking within delegated authority.

The Supreme Court ruling did not dismantle the tariff regime.

It forced it onto firmer statutory footing — and accelerated escalation to the maximum allowable rate.

What Happens Next

• The 15% surcharge expires July 24, 2026, absent congressional extension.
• The U.S. Trade Representative will monitor balance-of-payments conditions.
• Refund litigation over prior IEEPA tariffs continues.
• Trading partners will assess retaliation.
• Markets will price whether 15% becomes permanent.

Bottom Line for Rare Earth & Critical Mineral Markets

Certain critical minerals remain strategically insulated.

The broader global import baseline just moved to 15%.

Industrial buildout costs are likely rise. Section 122’s macro effectiveness remains unproven. The trade chessboard did not collapse. It escalated. And now the economic test begins.