US Pivots to New Global Tariff Plan

The Supreme Court's 6-3 decision on February 20, 2026, invalidated the use of the International Emergency Economic Powers Act (IEEPA) for imposing tariffs, stating Congress holds the primary authority to tax and must explicitly delegate such power. This ruling affects over $170 billion in collected tariffs and opens the door for potential refunds to importers, though the process for reimbursement remains undefined and is expected to face litigation. In a swift response, the administration terminated the IEEPA-based tariffs effective February 24, 2026, and simultaneously invoked Section 122 of the Trade Act of 1974. This pivot allows for a temporary global import surcharge, initially set at 10% and potentially rising to 15%, to address what the administration cited as a "fundamental international payments problem," including a significant trade deficit. Unlike the country-specific IEEPA tariffs, Section 122 mandates a broad, uniform application, though some exemptions exist for products from USMCA partners and in sectors like critical minerals and energy. However, this authority is time-limited, authorizing the surcharge for a maximum of 150 days unless extended by Congress, positioning it as a potential stopgap measure. This policy shift introduces fresh uncertainty for manufacturers who rely on global supply chains. The manufacturing sector is particularly exposed to tariff-related cost increases for raw materials and components. Internal audit functions are now critical in reassessing supply chain strategies, monitoring trade compliance, and developing contingency plans for sudden policy changes. The turn to Section 122, a provision unused since the shift to floating exchange rates in the 1970s, signals an ongoing reliance on tariffs in U.S. trade policy. While the Supreme Court's ruling curbed unilateral executive power under IEEPA, other tariff authorities, such as Section 232 for national security and Section 301 against unfair trade practices, remain in place. For internal auditors, the focus sharpens on advising clients through this volatility. Key concerns include the financial statement impact of fluctuating tariff costs, impairment assessments of assets, and ensuring compliance with a complex and evolving regulatory landscape. Proactive scenario planning and stress-testing supply chains for resilience against further trade disruptions are becoming essential advisory services.