After the Supreme Court ruled on February 20 that the International Emergency Economic Powers Act (IEEPA) did not give the president authority to impose tariffs, President Trump imposed a 10 percent tariff under a different statutory authority, Section 122 of the Trade Act of 1974 (and has suggested raising the tariff to 15 percent).

This change will affect industries very differently. Figure 1 shows total tariff costs, which include both the direct costs on imported consumption goods and the indirect costs arising from tariffed intermediate inputs. Tariffs on imported intermediate goods used by US manufacturers, such as steel, can raise costs across a wide range of final uses, including private consumption and residential investment.

FIGURE 1

Tariff replacement reduces tariff cost differently, depending on industry

Before the Supreme Court decision, TPC estimated that almost one-third of the total cost of tariffs fell on goods that were not directly subject to tariffs. Services, though not tariffed themselves, accounted for an additional one-sixth of the total added cost because they rely on tariffed intermediate goods.

We estimate that replacing IEEPA tariffs with Section 122 tariffs will reduce the added tariff costs on apparel and leather goods from 15 percent to 8 percent, relative to production costs including the tariffs in place in 2024. Other industries would see smaller declines: Fabricated metal product tariff costs would fall from 14 percent to 12 percent, while automobile tariffs would fall much less, from 6.3 percent to 5.6 percent.

If Section 122 tariffs expire, costs will fall for many goods, but other tariffs will remain

If businesses fully pass along those costs to consumers, increases in Figure 1 would reflect the average price increases faced by consumers. If firms instead absorb part of the estimated costs, their margins and profits will fall, potentially affecting wages, hiring, and investment. Over time, firms may adjust their supply chains and consumers may turn to cheaper alternatives, reducing these tariff-induced costs.

The Section 122 tariff expires after 150 days, on July 23, 2026. If it lapses without replacement, tariff-induced cost increases would fall close to zero for many goods. For example, textile products would face almost no tariff-related cost increases relative to 2024, while apparel and leather goods could see costs fall slightly below 2024 levels by 0.2 percent. Substantial tariffs would still apply to goods covered under Sections 232 and 301, such as computers and electronics, electrical equipment and appliances, and fabricated metal products.

Whatever tariffs remain, consumers and firms will continue to pay the price

Importantly, TPC assumes that the added cost of tariffs is fully paid by US businesses and consumers. Recent research by the New York Federal Reserve found that more than 90 percent of tariff costs were borne domestically during most of 2025. Earlier economic research on previous tariff increases similarly found that US consumers and firms largely paid the tariffs.

Because modern production relies on complex supply chains, tariffs often raise costs in many sectors not directly subject to them, affecting consumption and investment. With IEEPA tariffs gone and Section 122 tariffs in their place, several industries now face much lower costs. Letting the Section 122 tariffs expire would reduce costs further and could benefit the broader economy. Until then, there will be considerable uncertainty, which carries its own economic costs.