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 bilateral deals operate by substituting the deal rate for the standard balance-of-payments surcharge rate in the tariff stacking formula. For the EU, Japan, South Korea, and Taiwan, the deal rate is 15 percent — 5 percentage points above the 10% standard surcharge that applied before Section 122 lapsed on July 24, 2026; these deals provided rate-certainty within the framework in exchange for a small rate premium, and the deal rates persisted through the lapse. 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 and Section 301 interact with bilateral deals in the expected ways: Section 232 rates (25-50%) typically exceed the bilateral deal rates (15-20%) and govern for covered products. Section 301 applies exclusively to China and does not interact with bilateral deal countries. Understanding these interactions is critical for accurately calculating landed costs for imports from 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 the 10% global surcharge but did not explicitly incorporate the bilateral deal rates by reference into the new Section 122 framework. Instead, the administration has maintained the deal rates as de facto policy — customs enforcement reflects the deal rates, but the formal Federal Register notice establishing them under Section 122 authority has not been published as of March 2026.

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 played out at the July 24, 2026 cliff. Rather than expiring with Section 122, the bilateral deals persisted — the site's per-country data reflects those rates continuing — and a separate forced-labor Section 301 duty took effect the same day and stacked on top for covered economies. So imports from the EU, Japan, South Korea, Taiwan, India, and Vietnam did not revert to a standard rate or drop to MFN; they kept their bilateral rate and, where covered, added the forced-labor layer.

For compliance purposes, importers should document the basis for applying deal rates at entry, maintain awareness of any formal Federal Register notices published under Section 122 or alternative authority, and work with licensed customs brokers to manage the legal uncertainty in their entry filings.

The current bilateral trade deal rates effective as of March 2026 are:

European Union: 15 percent bilateral rate replacing the standard surcharge. The EU rate has been maintained since the IEEPA period and was set 5 percentage points above the 10% balance-of-payments surcharge that applied before Section 122 lapsed on July 24, 2026. For EU importers, the deal provides legal certainty and a formal framework in exchange for a small rate premium relative to standard non-deal countries. Major EU export categories to the US — machinery, chemicals, pharmaceuticals, luxury goods, aircraft, automobiles — are all subject to 15% if not otherwise covered by Section 232 or exempt.

Japan: 15% bilateral rate replacing Section 122, also effective March 1, 2026. Japan is a major exporter of automobiles (Section 232, 25%), auto parts (Section 232, 25%), electronics, machinery, and chemicals. Non-S232 Japanese exports face the 15% deal rate.

South Korea: 15% bilateral rate replacing Section 122, effective March 1, 2026. South Korea exports significant volumes of electronics, automobiles (S232 applies to autos), steel (S232 applies), chemicals, and petrochemicals. Non-S232 Korean goods face 15%.

Taiwan: 15% bilateral rate replacing Section 122, effective March 1, 2026. Taiwan's primary exports to the US are advanced semiconductors (S232 applies at 25%), electronics, and machinery. For semiconductor exports, Section 232 (25%) governs as it exceeds the bilateral deal rate (15%). For non-semiconductor electronics and machinery, the 15% deal rate applies.

India: 18% bilateral rate replacing Section 122, effective March 1, 2026. India exports pharmaceuticals (many exempt from S122), textiles, software-related goods, diamonds and jewelry, and engineering goods. Non-exempt Indian goods face 18% — 8 percentage points above the 10% Section 122 surcharge that applied before it lapsed to 0% on July 24, 2026.

Vietnam: 20% bilateral rate replacing Section 122, effective March 1, 2026. Vietnam exports electronics components (assembled), apparel, footwear, furniture, and electronics. Non-exempt Vietnamese goods face 20%.

Canada (non-USMCA): 10% rate (the standard Section 122 rate) for goods not qualifying for USMCA treatment, effective February 24, 2026 — the prior 35% IEEPA-fentanyl surcharge was struck down by the Supreme Court on February 20, 2026 and replaced by Section 122 per CBP CSMS #67844987.

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 15% deal rate applies to 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 product categories. The EU is the US's largest trading partner by total goods and services trade. For EU exporters and US importers of EU goods, the 15% deal rate is a significant cost factor across virtually all product categories not covered by Section 232.

For Japanese imports, the 15% deal rate applies to electronics (consumer and industrial), specialty chemicals, precision instruments, advanced materials, and industrial machinery not covered by Section 232. Japan's automobile exports face Section 232 (25%) rather than the bilateral deal rate (15%). Japan is a major auto exporter, so a significant portion of Japanese exports to the US face S232 rather than the bilateral rate.

For South Korean imports, the 15% deal rate applies to electronics (Samsung, LG products), chemicals, petrochemicals, and consumer goods. 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 (25%) rather than the bilateral deal rate (15%). TSMC's chip exports to the US are some of the highest-value US imports from Taiwan. The bilateral deal rate applies to non-semiconductor Taiwanese exports including some electronics components, machinery, and plastics.

Bilateral deal rates interact with the other tariff layers in a specific way established by 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) + China-punitive Section 301 (China only) — since Section 122 lapsed to 0% on July 24, 2026, that middle tier now resolves to max(Section 232, bilateral deal rate) for these countries.

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 from deal countries, Section 232 (25-50%) exceeds the bilateral deal rate (15-18%) and governs. A German steel export faces MFN + 50% S232 — not MFN + 15% bilateral deal. An auto import from Japan faces MFN + 25% S232 — not MFN + 15% bilateral deal. This is critical for importers of S232-covered goods from deal countries: their deal does not provide any cost advantage on those specific products.

For India (18% deal rate) and Vietnam (20% deal rate), goods from these countries faced higher special tariff rates than non-deal countries while Section 122's 10% baseline was in force. Since the July 24, 2026 lapse, non-deal countries sit at 0% Section 122, while India and Vietnam retain their higher bilateral rates — both now also carrying an additive forced-labor Section 301 duty (India in the 10% tier, Vietnam in the 12.5% tier) on top. The deal continues to provide predictability: India and Vietnam exporters know their rate, whereas Section 122 for standard countries has already resolved — it lapsed to 0% rather than remaining subject to further legal or political change.

The bilateral deal rates did not interact with China's punitive Section 301, which applies only to China. But note an important 2026 development: the forced-labor Section 301 duty that took effect July 24, 2026 IS a Section 301 action, and it does reach bilateral-deal countries — 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. So these countries now face their bilateral rate PLUS the forced-labor duty where covered, though still not the China-specific punitive Section 301.

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: imports from the EU, Japan, South Korea, Taiwan, India, and Vietnam did not revert to MFN. Each kept its bilateral rate, and the forced-labor duty added a further layer where the country was covered. Vietnam, for example, kept its 20% bilateral rate and added the 12.5% forced-labor duty; the EU, Japan, South Korea, and Taiwan (conditional-tier economies) saw the forced-labor top-up computed net of MFN on top of their bilateral rates.

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 therefore saw NO reduction: India kept its 18% bilateral rate and Vietnam its 20%, each with the forced-labor duty layered on for covered goods. Importers of bilateral-deal-country goods should model their persisting bilateral rate plus any applicable forced-labor duty, not an expiry-driven drop to MFN.