US slaps 10% tariff for 150 days under Section 122; Here’s how it may impact

US President Donald Trump has signed a Proclamation imposing a temporary 10% ad valorem import duty on goods entering the United States, effective February 24 at 12:01 a.m. EST, for a period of 150 days. The move follows his invocation of Section 122 of the Trade Act of 1974, which authorises the President to apply surcharges and other import restrictions to address fundamental international payment imbalances.

According to a White House note, the measure is aimed at correcting what the administration describes as significant international payment problems and rebalancing trade relationships in favour of American workers, farmers, and manufacturers.

Balance-of-payments pressures

The administration said the temporary duty is designed to reduce the outflow of US dollars to foreign producers by incentivising the return of domestic production. Increasing domestic output, officials argue, would help narrow the balance-of-payments deficit, generate better-paying jobs, and potentially reduce consumer costs.

The economic backdrop cited by the White House underscores mounting external imbalances. At the end of 2024, the US net international investment position stood at minus $26 trillion, equivalent to 89% of GDP, the most negative level globally. The figure implies that even if all US-owned foreign assets were immediately liquidated, the country would still owe an amount equal to nearly its annual economic output.

The United States currently runs an overall current account deficit as well as deficits across its key components — the trade balance of goods and services, primary income, and secondary income. The annual goods trade deficit expanded by more than 40% during the Biden administration, reaching $1.2 trillion in 2024. The current account deficit widened to -4.0% of GDP in 2024, nearly double the average level between 2013 and 2019 and the largest since 2008.

US officials have warned that failing to address these imbalances could impair the country’s ability to finance government spending, weaken investor confidence, and create risks for financial markets and national economic security.

Scope and exemptions

While the 10% duty applies broadly to imported articles, several categories are exempt to prevent disruption to critical sectors or supply chains. Exclusions include certain critical minerals, metals used in currency and bullion, energy and energy products, natural resources and fertilizers not sufficiently produced domestically, and selected agricultural products such as beef, tomatoes, and oranges.

Pharmaceuticals and pharmaceutical ingredients, certain electronics, specified passenger vehicles and automotive parts, certain aerospace products, informational materials such as books, donations, and accompanied baggage are also exempt.

Additional exclusions apply to goods already subject to Section 232 trade actions, USMCA-compliant products from Canada and Mexico, and textiles and apparel entering duty-free under the Dominican Republic-Central America Free Trade Agreement. The administration has also continued the suspension of duty-free de minimis treatment for low-value shipments, including goods entering through the international postal system.

Tariffs as a policy tool

The White House reaffirmed tariffs as a central instrument in the administration’s trade strategy, describing them as essential to reshoring manufacturing, protecting American businesses, and raising wages. Despite a recent Supreme Court decision that challenged aspects of the President’s trade approach, officials stated that the administration remains committed to reshaping what it views as a distorted global trading system.

The administration maintains that its tariff policies have brought major trading partners — representing more than half of global GDP — to negotiate new trade and investment agreements. These deals, officials say, are opening markets for US exports, promoting manufacturing reshoring, and strengthening technological leadership.

In parallel, the President has directed the Office of the United States Trade Representative to deploy Section 301 authority to investigate what the administration characterises as unreasonable or discriminatory foreign trade practices.

The broader strategy, according to the White House, combines tariffs and negotiated agreements to address structural external deficits, protect national interests, and restore balance to US trade relationships.