Tariffs and trade
Vehicles and parts exempt from new global tariffs after US Supreme Court rules initial tariffs illegal
The US Supreme Court came to a decision on the legality of US president Donald Trump's 'Liberation Day' global tariffs on February 20, 2026, finding that the act cited by Trump did not grant him the authority to impose such tariffs. He has since introduced a 15% global tariff through other means, from which auto products are exempt.
The Supreme Court ruling was initially delayed in January, but in February it came to the decision – by a 6-3 majority – that the International Emergency Economic Powers Act (IEEPA) "does not authorise the president to impose tariffs to deal with the declared drug trafficking and trade deficit emergencies".
Brett Kavanaugh, associate justice of the Supreme Court of the United States, said he firmly disagreed with the decision but noted that "the decision might not substantially constrain a president’s ability to order tariffs going forward" provided the tariffs are justified by another statute such as the Trade Expansion Act of 1962, the Trade Act of 1974 and the Tariff Act of 1930.
And that's exactly how Trump proceeded. With the tariffs imposed under the IEEPA immediately struck down, Trump signed a proclamation imposing a new "temporary import surcharge" of 10% – as permitted by Section 122 of the Trade Act of 1974. This act allows the president to impose a tariff up to 15% without congressional approval for a period of up to 150 days to "address fundamental international payments problems". Trump later claimed on social media that this 10% global tariff would be increased to the maximum rate of 15%.
However, several goods have been exempted from the new import duty "because of the needs of the US economy or in order to ensure the duty more effectively addresses the fundamental international payments problems facing the United States". Amongst these exempt goods are: passenger vehicles; certain light trucks; certain medium- and heavy-duty vehicles; buses; and certain parts of passenger vehicles, light trucks, heavy-duty vehicles and buses.
It was also announced that all goods compliant with the US-Mexico-Canada Agreement (USMCA) would be exempt from the duty. The tariff will be applied at the same rate to imports from any country outside the US and according to a White House official, all countries that had previously negotiated a lower tariff rate as part of trade negotiations – including the UK, the EU and India – will also be subject to the 15% rate.
It is worth noting that as the Supreme Court decision only related to those tariffs under the IEEPA, those with a legal basis of Section 232 of the Trade Expansion Act of 1962 or Section 301 of the Trade Act of 1974 remain. For automotive, this means the Section 232 tariff of up to 100% on certain EVs and the Section 301 tariff on medium- and heavy-duty trucks, for example, are still in force. Figure 1 shows which tariffs have been struck down, implemented or sustained following the Supreme Court's decision this February.
Figure 1: Legal basis for US tariffs in 2026 explained
| Section | Act | Congressional approval required? | Automotive-related tariffs | Automotive-related exemptions | Tariffs in force today? |
|---|---|---|---|---|---|
| 50 USC 1702 | International Emergency Economic Powers Act of 1977 | Yes (as determined by Supreme Court in February 2026) |
|
No consistent auto-specific exemptions; applied broadly by country | No (struck down by Supreme Court) |
| 122 | Trade Act of 1974 | Required after first 150 days |
|
Full exemption for: passenger vehicles; certain light trucks; certain medium- and heavy-duty vehicles; buses; and certain parts | Yes (imposed following Supreme Court decision) |
| 301 | Trade Act of 1974 | No (presidential authority following Trade Representative investigation) |
|
Product-specific exclusions (limited, temporary); no broad auto exemption | Yes (still in force) |
| 232 | Trade Expansion Act of 1962 | No (presidential authority following Department of Commerce investigation) |
|
USMCA exemptions: tariffs applied only to non-US content for qualifying vehicles and parts; 25+ year-old vehicles exempt | Yes (still in force) |
What does this mean for automotive supply chains?
While some might have hoped the Supreme Court's decision would provide greater clarity for the automotive sector, in fact it appears to have created more uncertainty. Tariffs will continue to be collected through different legal tools, while the possibility of refunds for IEEPA-related tariffs remains unclear.
Opinions on the new tariff compared to previous global tariffs will depend almost entirely on perspective, as different countries have been affected in different ways. China, for example, faced stacked tariffs of up to 60% under IEEPA-enabled regulation, so the reduction of this to a rate of 15% will be welcomed by those importing vehicles and parts from China.
On the other hand, the UK had negotiated a 10% tariff rate on most goods imported by the US, so the flat 15% rate looks set to effectively eliminate the benefits of such a trade agreement.
On the whole, this news will provide moderate relief for the sector with more consistent tariffs across the board for all countries. However, the constant fluctuation in the global trade and tariff landscape continues to be a source of uncertainty, making supply chain planning and long-term decision-making all the more difficult. Agility will be key as this situation continues to unfold.
With all this trade uncertainty in North America, there’s never been a more important time to connect with the industry and hear from expert decision-makers how they’re addressing some of the biggest challenges facing the automotive sector today and in the coming years. Automotive Logistics is hosting several conferences in North America this year – check them out below and register today.
