Section 122 could temporarily replace up to 73% of IEEPA revenues

Over the past week, we received final tariff collections data for 2025 from the Treasury Department, a new Beige Book from the Fed, and a hint at what the administration plans if the Supreme Court rules against the IEEPA (International Emergency Economic Powers Act) tariffs. Let’s start there.

National Economic Council Director Kevin Hassett said that the Trump administration could levy a 10 percent tariff “right away” if the Supreme Court strikes down the IEEPA levies.

This gives us a big hint about the president’s tariff strategy if IEEPA is off the table: immediately replace IEEPA with Section 122 authority, which allows temporary tariffs up to 15 percent in response to “large and serious United States balance-of-payments deficits."

After 150 days, Section 122 tariffs need congressional approval to continue, which is unlikely. Instead, we’d likely see a flurry of Section 232 and Section 301 activity, as Hassett suggested, to implement additional tariffs after the 150-day period.

At Tax Foundation, we estimate that over 150 days:

A 10 percent tariff on the same goods that now face IEEPA tariffs could raise up to $36 billion in direct tariff payments ($27 billion in net revenue).

A 15 percent tariff on the same goods that now face IEEPA tariffs could raise up to $47 billion in direct tariff payments ($36 billion in net revenue).

That suggests that for at least 150 days, the president could replace between 56 to 73 percent of IEEPA’s expected 150-day revenue. But it also assumes that importers would continue buying during the 150 days of the tariff; they may hold off on their purchases to wait for what comes next, dampening the potential revenue.

At Tax Foundation, we also finalized our tariff revenue estimates for calendar year 2025, estimating that the government netted $132 billion from new tariffs in 2025. While revenue forecasting is an inherently tricky task, I am very pleased with how our forecasts line up with the data we have on actual collections for the year.

As Table 1 shows, tariffs on imports from Canada and Mexico were some of the trickiest to estimate due to the large compliance response with USMCA. We regularly updated our revenue base as real-time USMCA compliance data arrived. Now that the compliance response is likely to have stabilized, IEEPA tariff revenues for Canada and Mexico will likely be more stable moving into 2026.

In total, the Treasury Department reports that the federal government collected $286 billion in customs duties in calendar year 2025 (that includes both new and old tariffs), compared to $79 billion the year prior. The government netted less than the headline collections, however, because each dollar of tariff collected mechanically reduces income, lowering payroll and income tax collections.

The Federal Reserve published its first Beige Book of 2026, with 50 mentions of the word “tariff.” Key tariff-related themes suggest more price pass-through this year as firms adapt to higher costs and lingering uncertainty:

• Firms are still grappling with how to respond to tariffs, and as pre-tariff inventories have dwindled and pressure to preserve profit margins grows, many more firms will begin to pass tariffs along in the form of higher prices.
• Firms across multiple districts reported that they were a bit more optimistic because tariff uncertainty has declined recently with fewer changes to tariff policy. But other firms reported that lingering uncertainty over the future path of tariffs was limiting their ability to plan ahead.
• Manufacturers across several districts cited tariffs as a continuing challenge, raising costs and reducing margins in the manufacturing sector. Some manufacturers, however, noted the ability to negotiate down costs or find alternative suppliers to reduce their tariff burden.

And how are the new tariff exemptions for food affecting prices? One Beige Book anecdote suggests some exemptions aren’t moving the needle, at least not yet: “A coffee roaster [in the New York District] noted that while tariffs on coffee have largely been lifted, selling prices will only go down once the stock of inventory acquired at higher costs has been cleared.”