Bilateral Trade Deals

Bilateral trade deals in the current US tariff environment are executive-level agreements that establish negotiated tariff rates replacing the standard 15% Section 122 global surcharge for specific countries. These deals were negotiated with major US trading partners including the European Union, Japan, South Korea, Taiwan, India, and Vietnam, and also established the 35% rate for non-USMCA Canadian goods.

The bilateral deals operate by substituting the deal rate for the Section 122 rate in the tariff stacking formula. For the EU, Japan, South Korea, and Taiwan, the deal rate is 15% — the same as the standard Section 122 rate, so in practice these deals provide certainty within the Section 122 framework rather than a lower rate compared to standard countries. For India and Vietnam, the deal rate is 18% — actually higher than the standard 15% Section 122 rate, reflecting these countries' lower development status and the political dynamics of their negotiations. Non-USMCA Canadian goods face 35% — the highest bilateral rate, intended to pressure Canada to maximize USMCA compliance.

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 (15-18%) 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 15% 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 are significant. If the deal rates are successfully challenged legally, imports from bilateral deal countries could revert to the standard 15% Section 122 rate pending formal reimplementation. More critically, when Section 122 expires on July 24, 2026, the bilateral deals — defined as replacements for the Section 122 rate — may expire as well without independent legal authority. Importers from EU, Japan, South Korea, Taiwan, India, and Vietnam should monitor legal developments closely in Q2 2026.

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% bilateral rate replacing Section 122. The EU rate has been maintained since the IEEPA period and equals the standard Section 122 rate. For EU importers, the deal provides legal certainty and a formal framework rather than a lower rate compared to standard 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% — higher than the standard 15% S122 rate.

Vietnam: 18% bilateral rate replacing Section 122, effective March 1, 2026. Vietnam exports electronics components (assembled), apparel, footwear, furniture, and electronics. Non-exempt Vietnamese goods face 18%.

Canada (non-USMCA): 35% rate for goods not qualifying for USMCA treatment, effective February 24, 2026.

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) + Section 301 (China only).

The "max" function means that for bilateral deal countries, the deal rate replaces Section 122 only where the deal rate is higher. For EU, Japan, South Korea, and Taiwan with a 15% deal rate equal to the standard Section 122 rate, the practical effect on non-S232 goods is that the deal rate and S122 rate produce the same result. The deal framework provides certainty but not a lower rate compared to standard Section 122 countries.

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 and Vietnam with 18% deal rates, goods from these countries actually face a higher special tariff rate (18%) than non-deal countries (15% S122). However, the deal provides predictability — India and Vietnam exporters know their rate, whereas standard countries face the S122 rate that may change based on S122's legal and political status.

The bilateral deal rates do not interact with Section 301 because Section 301 applies exclusively to China. EU, Japanese, Korean, Taiwanese, Indian, and Vietnamese goods face no Section 301 charges. The absence of Section 301 for these countries means their goods face a significantly lower effective rate than equivalent Chinese goods — typically MFN + 15% deal vs. MFN + 15% S122 + 25% S301 for China.

The most significant uncertainty in the bilateral deal framework is what happens when Section 122 expires in July 2026. If deal rates are formally defined as Section 122 replacements, they may expire when Section 122 expires. The administration may seek to renegotiate deals under alternative authority, but this creates a period of uncertainty for importers from deal countries.

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 15% 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% rates 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 faces its most significant test when Section 122 expires on July 24, 2026. If the deals were implemented as Section 122 replacements, their status after Section 122 expiration is legally uncertain. Three scenarios are possible:

Scenario 1 — Deals expire with S122: If no new statutory authority is enacted and Section 122 expires without extension, the deal rates may expire simultaneously. Imports from EU, Japan, South Korea, Taiwan, India, and Vietnam would revert to MFN-only treatment (typically 0-5% for most goods), assuming no new surcharge replaces Section 122. This would be a significant tariff reduction for deal country importers.

Scenario 2 — Deals continue under new authority: The administration enacts new tariff legislation or executive action before July 2026 that explicitly incorporates and maintains bilateral deal rates. This is the administration's preferred outcome and would preserve the current rate structure beyond July 24, 2026.

Scenario 3 — Formal deal agreements: The US and bilateral deal partners formalize their arrangements as standalone executive agreements or free trade agreements under Section 1102 of the Trade Act of 1974 or other authority. This would create durable legal basis independent of Section 122.

For importers of goods from bilateral deal countries, the uncertainty about post-July 2026 rates is a significant planning challenge. Importers with contracts extending beyond July 2026, or those making capital investment decisions based on current cost structures, should model both the "deals continue" and "deals expire" scenarios when calculating projected landed costs.

India and Vietnam importers face additional complexity: if Section 122 expires and the 18% deal rates expire with it, their imports would revert to lower MFN rates (0-15% for most goods), representing a cost reduction. But if Section 122 is extended or replaced with similar rates, India and Vietnam would continue at 18%.