The Trump administration's reciprocal tariff agenda is the single most disruptive change to U.S. trade policy in recent history — and its legal foundations remain in flux. After the Supreme Court struck down the IEEPA basis for that policy, the administration is actively seeking a new statutory vehicle to preserve it. That search raises urgent questions for businesses on both sides of the Atlantic: What legal mechanism will the administration turn to next? How durable will it prove, legally and politically? And what can companies do now to prepare and adapt?
Setting the scene: the legal framework
In the immediate aftermath of the Supreme Court decision in February, the administration acted under Section 122 of the Trade Act of 1974 to impose a baseline 10% global tariff. Section 122 is designed to address balance-of-payments crises and is time-limited: the president can impose it for up to 150 days before Congress must extend it. That authority expires on July 24, 2026.
The longer-term vehicle is Section 301, which is also rooted in the Trade Act of 1974, but gives the United States broad retaliatory authority where it believes a partner is trading unfairly. The administration has announced two very broad investigations under the Section 301 umbrella: one on excess capacity and one on forced labor enforcement. For the tariffs to hold under Section 301, USTR must conduct an investigation and hold a notice-and-comment period before final duties are announced. The administration’s intent is that its tariff architecture can be moved onto this new base before Section 122 measures lapse.
Notably, Section 301 is almost certainly a more durable base than IEEPA, rooted as much in established USTR process as executive prerogative. The China Section 301 tariffs — in place since the first Trump administration — have withstood years of legal challenge. In this case, USTR head Ambassador Greer, a trade attorney by background, constructed the evidentiary case carefully, with country-specific excess capacity arguments and emphasis on the fact that the U.S. currently has the only statutory forced labor reporting requirements among major economies.
The first investigation on forced labor has now produced the expected recommendation that the U.S. should impose largely identical tariffs to those currently imposed under Section 122. This is 10% in the case of the EU and UK, and 10-12% on other partners. It is all but certain that this recommendation will be accepted and the Section 122 regime will migrate to the new legal basis before the July 24th deadline.
Tariff politics and practicalities
This still leaves a number of very practical questions unanswered. One is how these new 301 tariffs might interact with other tariffs imposed by the U.S., including national security tariffs levied under Section 232 and the U.S.’ general Most Favored Nation (MFN) tariff. While certainty will have to wait for a formal announcement, the expectation is that the new Section 301 measures would stack on top of MFN tariffs in the same way that their IEEPA and Section 122 predecessors did. The exception is likely to be the case of the EU, where last year’s agreement at Turnberry, Scotland capped total combined tariffs at 15%. The equivalent precedent on Section 232 measures is that they will run separately to 301 measures, which will be suspended where a 232 measure is present.
A second question will be how any tariffs proposed in the weeks ahead as part of the second, wider excess capacity 301 investigation might interact with this first batch of proposed tariffs. Because part of the function of the 301 process is to produce a legal basis for ‘deals’ struck by the U.S. administration in 301, trading partners are broadly expecting the U.S. to limit 301 tariffs to those agreed levels. The administration may choose to threaten the second tariff as leverage where it feels a trading partner is falling short of 2025 commitments. In other cases, it may cap the combined measures at the previously agreed level.
This will be a consequential choice, not least in Europe. European governments and the European Parliament have now politically accepted the basic premise of new U.S. tariffs in return for a reduction in EU levies, although they have inserted a suspension clause in the package if the U.S. fails to reduce 15% steel derivative tariffs by year-end, and a sunset clause expiring it in December 2029. They have done this on the basis of the status quo – a 10% Section 122 tariff. If the U.S. changes those terms with a second 301 threat, it will strain that deal.
What companies can do today
What all of this clearly indicates is that new legal basis for U.S. tariffs does not mean greater stability.
While the EU reached an important milestone in its approval of implementing legislation for the EU-U.S. trade framework, negotiations will continue on other terms of the framework. The U.S. administration still wants concrete European action on non-tariff barriers and digital trade policy, which means the scope for disagreement remains material with potential for ongoing instability in the relationship. Without IEEPA, the president can no longer change tariff rates by emergency declaration overnight. Section 301 is an agency-led process mapped out in statute. That constrains the scope for improvisation, but it does not eliminate it. The president maintains the ability to swiftly change existing Section 232 tariff orders, as the president threatened to do on European auto exports.
As we reach 18 months into the president’s second term, many companies are adjusting to the reality that tariffs are here to stay, but some are questioning whether a future administration would reverse this course, and in what ways. This is the wrong frame. The more prudent question is what gets modified, what gets reordered, and what endures – both Section 232 and 301 tariffs from Trump’s first term continued in the Biden Administration. Those contemplating the 2028 transition should be building a clear-eyed view of that distinction and engaging with policymakers on a bipartisan basis not assuming a reversion to the pre-2025 or pre-2016 status quo ante.
Even more, it is helpful to think beyond the day-to-day into the medium term, where there are three practical priorities:
Assessing tariff exposure from ongoing trade investigations and developing a clear, prioritized advocacy strategy.
Mapping supply chain vulnerabilities to the ongoing experimentation in U.S. trade policy – and the policies it is provoking - and the strategies that follow from them, recognizing that sectoral exposure varies considerably depending on input sourcing and trade routes.
Staying ahead of not only how the agreement struck at Turnberry is being implemented, but also the broader trade and geopolitical developments that shape both U.S. and EU decision-making.
One dimension that is often underweighted is the broader stakeholder implications. These tariffs are ultimately paid by U.S. importers, not by European exporters. That makes close engagement with American customers a strategic priority. The companies best positioned will be those that have maintained dialogue about cost pass-through, understood their customers' constraints, and planned for these scenarios rather than reacting to them.
