Bilateral Trade Deals

Bilateral trade deals in the current US tariff environment are executive-level agreements that established negotiated tariff rates replacing Section 122's standard 10% global surcharge for specific countries while Section 122 was in force; those negotiated rates persisted after Section 122 itself lapsed to 0% on July 24, 2026. These deals were negotiated with major US trading partners including the European Union, Japan, South Korea, Taiwan, India, and Vietnam. The IEEPA-fentanyl 35% surcharge that previously applied to non-USMCA Canadian goods was struck down by the Supreme Court on February 20, 2026 and replaced by the standard Section 122 rate effective February 24, 2026; non-USMCA Canadian and Mexican goods are now treated identically — both face the 10% forced-labor Section 301 duty that backfilled Section 122 after its lapse, not a separate bilateral deal.

The country-specific reciprocal rates worked by substituting a country rate for the general surcharge in the middle tier of the stacking formula, while they lasted. The EU, Japan, South Korea and Taiwan were each assigned 15 percent, India 18 and Vietnam 20. All six were terminated by Executive Order 14389 on February 20, 2026 and are no longer collected. India agreed to an 18 percent rate and Vietnam to a 20 percent rate, reflecting these countries' lower development status and the political dynamics of their negotiations. Non-USMCA goods from Canada and Mexico faced the standard 10% rate while it was in force (the prior 35% IEEPA-fentanyl surcharge on Canadian non-USMCA goods was struck down February 20, 2026 and replaced by the standard surcharge effective February 24, 2026 per CBP CSMS #67844987); since the lapse that standard rate is 0%, with a forced-labor Section 301 duty backfilling it for covered origins.

The legal status of these bilateral deals is uncertain. They were originally negotiated under IEEPA authority, which was struck down by the Supreme Court on February 20, 2026. Following the IEEPA ruling, the administration maintained the deal rates de facto but has not formally reimplemented them under Section 122 or other statutory authority via Federal Register notice. This legal uncertainty creates compliance risk for importers who rely on deal rates for long-term cost planning.

Section 232 still governs for the products it covers, at 25-50%, and S232-covered goods are excluded from the forced-labor duty. China's punitive Section 301 applies exclusively to China. The forced-labor Section 301 duty is the layer that does reach these six economies, and understanding its two tiers is what matters for accurately calculating landed costs for imports from the EU, Japan, South Korea, Taiwan, India or Vietnam.

The bilateral trade deals currently in effect were originally negotiated under IEEPA (International Emergency Economic Powers Act) authority beginning in 2025. Following the Supreme Court's February 20, 2026 ruling striking down IEEPA tariff authority, the administration maintained the deal rates without formally reimplementing them under a new statutory basis.

The Section 122 proclamation of February 24, 2026 established a 10% global surcharge and did not incorporate the country-specific reciprocal rates, which is unsurprising: those rates had been terminated four days earlier by Executive Order 14389, and Section 122 authorises a uniform rate rather than differential country rates. No Federal Register notice re-establishing them under Section 122 authority was ever published, and CBP has since been refunding the duties collected under the terminated headings.

This creates a legal grey area. The bilateral deal rates are currently applied in practice but may lack a formal statutory basis following the IEEPA invalidation. If challenged in the Court of International Trade, a court could find that the deal rates lack proper legal authorization under the Section 122 framework. The administration has indicated an intent to formalize the deals but has not published formal implementing regulations.

The implications for importers were settled before the July 24, 2026 cliff rather than at it. The country-specific rates ended on February 20, 2026 under Executive Order 14389, five months earlier, so by the time Section 122 lapsed there was nothing left in the middle tier for these origins to lose. What arrived on July 24 was the forced-labor Section 301 duty, which reaches them because Executive Order 14389 spared Section 301 by name.

For compliance purposes, importers should check whether entries filed under the terminated headings are eligible for refund per CBP's worksheet at 91 FR 42207, and should be aware that the HTSUS still prints those headings: Executive Order 14389 section 2(b) requires an implementing Federal Register notice to amend the schedule and none has issued. A heading appearing in Chapter 99 is not evidence that its duty is being collected. Work with licensed customs brokers on refund claims and on classification for the Section 232 categories that did survive.

None of the country-specific reciprocal rates reported through 2025 as bilateral deals is collected today. Executive Order 14389, "Ending Certain Tariff Actions" (91 FR 9437), provided on February 20, 2026 that the additional ad valorem duties imposed pursuant to IEEPA in Executive Order 14257, as amended, are no longer in effect and are no longer to be collected. Those country rates were lines inside that order, enumerated in HTSUS Chapter 99 alongside the universal reciprocal baseline rather than standing as a separate instrument. CBP published a refund worksheet for duties collected under the terminated headings at 91 FR 42207 on July 8, 2026.

What each of these origins faces now is the MFN base rate plus the forced-labor Section 301 duty, which took effect on July 24, 2026 and which Executive Order 14389 expressly spared. The duty comes in two shapes and the difference decides the arithmetic:

European Union: 10 percent, conditional tier. The duty is computed net of MFN, so an EU total lands at 10 percent rather than 10 above MFN — and a product whose MFN already exceeds 10 percent carries no forced-labor duty at all. Major EU export categories to the US are machinery, chemicals, pharmaceuticals, luxury goods, aircraft and automobiles; the Section 232 categories among those carry their own rate instead.

Japan: 12.5 percent, conditional tier. Japan is a major exporter of automobiles (Section 232, 25%), auto parts (Section 232, 25%), electronics, machinery and chemicals. Non-S232 Japanese goods land at 12.5 percent total.

South Korea: 12.5 percent, conditional tier. South Korea exports significant volumes of electronics, automobiles (S232 applies), steel (S232 applies), chemicals and petrochemicals. Non-S232 Korean goods land at 12.5 percent total.

Taiwan: 10 percent, conditional tier. Taiwan's primary exports to the US are advanced semiconductors, electronics and machinery. Semiconductors are Section 232-covered at 25 percent and are excluded from the forced-labor duty entirely; non-semiconductor electronics and machinery land at 10 percent total.

India: 10 percent, flat tier. The flat tier is additive rather than net of MFN, so Indian goods pay MFN plus 10. India exports pharmaceuticals, textiles, software-related goods, diamonds and jewelry, and engineering goods.

Vietnam: 12.5 percent, flat tier, likewise additive. Vietnam exports assembled electronics components, apparel, footwear and furniture.

Canada (non-USMCA): 10 percent, and the authority behind that number changed on July 24, 2026. It was the Section 122 surcharge from February 24, 2026 per CBP CSMS #67844987, which had itself replaced the 35% IEEPA-fentanyl surcharge struck down on February 20, 2026; when Section 122 lapsed to 0 percent, the forced-labor Section 301 duty Canada is on carried the same 10 percent forward, added on top of MFN. This is still not a negotiated country rate, and the engine charges no separate bilateral layer for it. USMCA-qualifying Canadian goods remain at 0 percent on every layer except Section 338.

Bilateral deal rates apply to all imports from the respective deal country that are not otherwise covered by a more specific tariff mechanism. The scope of each deal encompasses the entire import basket from that country, with Section 232 products (governed by their own rates) as the primary exception.

For European Union imports, the layer that now applies across the enormous diversity of EU exports to the US — German-made industrial machinery, French wines and spirits, Italian luxury goods, Irish pharmaceuticals, Dutch chemicals, Swedish automotive components and countless other categories — is the forced-labor Section 301 duty at a 10% ceiling computed net of MFN. The EU is the US's largest trading partner by total goods and services trade. Because that ceiling is net of MFN rather than additive, a high-MFN European product can carry no forced-labor duty at all, which makes MFN the first thing an EU importer should check.

For Japanese imports, the 12.5% conditional forced-labor duty reaches electronics (consumer and industrial), specialty chemicals, precision instruments, advanced materials, and industrial machinery not covered by Section 232, bringing each to 12.5% total net of MFN. Japan's automobile exports face Section 232 at 25% instead and are excluded from the forced-labor duty. Japan is a major auto exporter, so a significant portion of Japanese exports to the US sit outside the forced-labor layer entirely.

For South Korean imports, the 12.5% conditional forced-labor ceiling applies to electronics (Samsung, LG products), chemicals, petrochemicals and consumer goods, computed net of MFN. Korean steel and aluminum face Section 232 (50%). Korean automobiles face Section 232 (25%). A notable portion of Korean export value to the US is in S232-covered products.

For Taiwan, the most significant product category — advanced semiconductors — faces Section 232 at 25% and is excluded from the forced-labor duty. TSMC's chip exports to the US are some of the highest-value US imports from Taiwan. Taiwan's 10% conditional forced-labor ceiling applies to non-semiconductor exports including some electronics components, machinery, and plastics.

The middle tier of the core stacking formula — MFN rate + max(Section 122, Section 232, bilateral deal rate) + forced-labor Section 301 (if the origin is on the covered list) + country-specific Section 301 (the China lists, or Brazil at 25%) — is now empty for these six countries. Section 122 lapsed to 0% on July 24, 2026 and their country-specific rates were terminated on February 20, 2026, so the tier resolves to Section 232 alone where a product is covered, and to zero where it is not.

The "max" function meant that for bilateral deal countries, the deal rate replaced the balance-of-payments surcharge only where the deal rate was higher, while Section 122 was in force. For EU, Japan, South Korea, and Taiwan with a 15 percent deal rate that was 5 percentage points above the 10% standard surcharge that applied before Section 122 lapsed on July 24, 2026, the practical effect on non-S232 goods was that the deal rate exceeded the standard rate by 5 points. The deal framework provided rate-certainty for these importers in exchange for a small rate premium relative to standard balance-of-payments-surcharge countries during that period.

For Section 232 products, Section 232 governs at 25-50% and the forced-labor duty does not apply at all. A German steel export faces MFN + 50% S232. An auto import from Japan faces MFN + 25% S232. This is critical for importers of S232-covered goods from these origins: neither the terminated reciprocal rate nor the forced-labor duty changes their cost on those specific products.

India and Vietnam once carried reciprocal country rates of 18% and 20%, higher than most origins. Both were terminated on February 20, 2026, four days before Section 122 was invoked, so the two never overlapped. Today India and Vietnam sit on the flat tier of the forced-labor Section 301 duty at 10% and 12.5% respectively, added on top of MFN, and that is the whole of their special-tariff exposure outside Section 232. Section 122 for every origin has already resolved — it lapsed to 0% rather than remaining subject to further legal or political change.

China's punitive Section 301 applies only to China and never reached these origins. The forced-labor Section 301 duty that took effect July 24, 2026 is a different Section 301 action and it does reach them — the EU and Taiwan at a 10% net-of-MFN cap; Japan, South Korea and Switzerland at 12.5%; India in the flat 10% tier; Vietnam in the flat 12.5% tier. Because Executive Order 14389 spared Section 301 by name while ending the IEEPA reciprocal duties, this is now the only special-tariff layer these countries carry outside Section 232.

The bilateral deal framework was tested when Section 122 lapsed in July 2026, and the deals did not expire — they persisted, with the forced-labor Section 301 duty layered on top for covered economies. The pre-cliff worry that the deals would lapse with Section 122 did not materialize.

The bilateral deal framework originated in the broader tariff policy context of 2025. Following initial broad tariff actions under IEEPA authority, the administration began negotiating country-level deals to provide legal certainty and diplomatic stability with key trading partners. The EU, Japan, South Korea, Taiwan, India, and Vietnam all engaged in negotiations aimed at securing reduced or clearly defined tariff rates in exchange for various trade commitments.

These negotiations were ongoing when the Supreme Court issued its February 20, 2026 ruling striking down IEEPA tariff authority. The ruling created an immediate legal crisis for the tariff architecture, as IEEPA had been the primary legal basis for both the broad tariff actions and the bilateral deals negotiated as exceptions to them.

The administration responded to the IEEPA ruling with the Section 122 proclamation of February 24, 2026. The Section 122 proclamation established the 10% global surcharge and the USMCA exemption but did not explicitly incorporate the bilateral deals by reference or formally implement them under Section 122 authority. The administration instead maintained the deal rates de facto, with customs enforcement continuing to apply the negotiated rates.

The EU, Japan, South Korea, Taiwan, India, and Vietnam each made different assessments of the deals. Some trade partners expressed concern about the lack of a formal legal basis for the deal rates post-IEEPA. The US and EU held discussions in Q1 2026 about formalizing deal terms. Japan, South Korea, and Taiwan followed similar diplomatic tracks. India and Vietnam, facing higher rates than standard countries, sought clarification on whether their 18% and 20% rates respectively would be maintained or reduced.

As of March 2026, no formal reimplementation of bilateral deals under Section 122 has been published. The deals exist in a legal grey zone: applied in practice but not formally enacted under current statutory authority. This situation is expected to resolve either through formal Federal Register action or through development of successor tariff authority before July 2026.

The bilateral deal framework was tested when Section 122 lapsed on July 24, 2026 — and the deals did NOT collapse. The outcome that materialized was Scenario 2: the bilateral rates persisted through the cliff (the site's per-country data reflects them continuing), and a separate forced-labor Section 301 duty took effect the same day and stacked additively on top for covered economies.

What actually happened: the reciprocal country rates had already gone five months earlier, terminated by Executive Order 14389 on February 20, 2026. So the July 24 cliff found these origins at MFN alone, and what it added was the forced-labor duty. Vietnam pays MFN plus a flat 12.5%; the EU, Japan, South Korea and Taiwan are conditional-tier, so their duty is computed net of MFN and their totals land at the 10% or 12.5% ceiling rather than above it.

For contrast: the pre-cliff "deals expire and revert to MFN" scenario (which would have been a large tariff reduction for these importers) did not occur. Nor did a clean Section 122 extension — instead the forced-labor Section 301 action served as the successor mechanism.

India and Vietnam importers saw their large reduction in February rather than in July: 18 and 20 points came off when the reciprocal tariff was terminated, and 10 and 12.5 points went back on in July as the forced-labor duty. Importers of goods from these six origins should model MFN plus the applicable forced-labor duty, and should check whether entries filed under the terminated headings are eligible for refund.