Most of the post-February coverage of US tariffs on Mexico has read like the story ended. The Supreme Court struck down the IEEPA tariffs on February 20, 2026 [1], the headlines moved on, and the working assumption inside a lot of boardrooms became “the tariff overhang has cleared.” That read is wrong on the facts and dangerous on the planning. The tariffs did not disappear. They shifted to a different statutory authority — Section 122 of the Trade Act of 1974 — at a flat 10%, with USMCA-compliant goods exempted [2], [3].
The second fact is the one being underweighted in most of the coverage we have read. Section 122 is statutorily time-boxed. It sunsets on or about July 24, 2026 [2]. What replaces it is the open question every executive in the supply chain should be pricing right now, not the question they should plan to start pricing in June. Here is the read.
SCOTUS — what was actually decided
The February 20 ruling addressed a narrow but consequential question: whether the International Emergency Economic Powers Act gave the executive branch authority to impose broad-based country tariffs as instruments of trade policy [1]. The Court said no. IEEPA is an emergency-economic-sanctions statute. It was not designed for tariff policy, and the majority was unwilling to treat it as a general-purpose tariff authority by extension.
What the ruling did not touch is also the part most of the trade press has glossed. Section 232 (national security), Section 301 (unfair trade practices), and Section 122 (balance-of-payments) remain in force and operationally available [1], [6]. The ruling resolved one source of legal uncertainty and immediately exposed another — the question of which of the surviving authorities the administration would lean on, and what that would mean for the steady-state rate facing Mexico-origin and Mexico-routed goods.
The answer in March was Section 122 at 10%, USMCA-compliant goods exempt [2], [3]. That is the operating regime today.
Section 122 — the operating framework today
Section 122 of the Trade Act of 1974 authorizes the President to impose a temporary import surcharge of up to 15% to address a fundamental balance-of-payments deficit. The current invocation is at 10%, applied as a flat rate against Mexico-origin imports, with goods that qualify under USMCA exempted from the surcharge [2], [3]. The exemption is the load-bearing element of every cost model that depends on it.
“USMCA-compliant” in this context is not a brochure phrase. It is a documentation standard. To claim the exemption, the importer needs to demonstrate that the good meets the agreement’s rules-of-origin tests — regional value content thresholds where applicable, tariff-shift requirements where applicable, and substantial-transformation evidence where applicable. The customs authority’s audit standard is record-based, not assertion-based. A claim that fails on documentation is a claim that fails.
“Section 122 is not ‘no tariff’ — it is a 10% tariff with a USMCA exemption that demands rigorous rules-of-origin documentation. The exemption is only as strong as the paperwork.”
The practical implication is that the operating cost of Mexico-routed manufacturing today depends on a binary the company controls: either the rules-of-origin file is audit-ready, in which case the surcharge does not bite, or it is not, in which case the company is paying 10% on goods it assumed were exempt. The most expensive version of this error is the one that surfaces during a customs audit twelve months after the shipment, when the recovery path is narrow and the cash-flow effect compounds.
The July 24 sunset — why the window is short
Section 122’s statutory limit is the part that turns this from a steady-state regime into a planning problem. The statute caps the surcharge’s life at 150 days unless extended by congressional action [2]. Working from the regime’s effective start, the operative date is on or about July 24, 2026. After that, the executive branch needs a different authority — or the regime ends — and a different rate enters force.
What that “different rate” looks like is currently unsettled. The USMCA joint review formally launched on March 5 [5], the negotiation has been live since, and on April 7 USTR Robert Greer publicly stated that talks “may run past July 1” — an explicit signal that deadline slippage is now the working assumption inside the process itself [4]. That same signal makes the post-Section-122 regime a moving target rather than a fixed end-state to plan against.
The strategic reading is that the window between today and July 24 is a planning horizon, not a stable operating regime. Companies that treat it as steady-state will discover the regime change as a fait accompli on whatever the new effective date turns out to be. Companies that treat it as a 90-day window plan around it.
What might replace it — three live scenarios
The post-Section-122 regime falls inside one of three scenarios, and the planning posture should be robust across all three rather than optimized for any single one.
Scenario A — Stabilization at similar rates. A renewed Section 122 invocation, a Section 232 or 301 substitute at comparable rates, or a negotiated settlement that keeps the USMCA exemption intact and lands the steady-state burden in the same neighborhood as today. Operationally similar to the current state. Most operationally convenient. Not the modal outcome based on the current negotiation tone.
Scenario B — Harder rules of origin, especially automotive. USMCA review concludes with tightened RVC thresholds and stricter Chinese-content restrictions. The headline rate may not move much. The compliance burden increases sharply. Companies with Chinese-content exposure in their bill of materials carry the greatest reset cost. The USITC investigation into automotive RVC, already active, makes auto the cluster most exposed to this scenario.
Scenario C — Disruption. Political escalation produces withdrawal threats, formal renegotiation that drags into 2027, or a new tariff regime that does not preserve the USMCA exemption in the same form. Lower-probability but the highest-cost scenario for any company that has not stress-tested its model against it.
“Plan across all three scenarios. Do not bet on Scenario A just because it is the most operationally convenient one.”
What manufacturers should do in the window
The next ninety days have a finite list of high-leverage moves. We apply this short list on every active engagement.
Audit RVC on every shipped SKU before July. If the USMCA exemption is the load-bearing element of the cost model, the RVC file is the load-bearing element of the exemption. Pull the records, check the math, and identify any SKU that is exempt today but would fail a stricter Scenario B test. Those SKUs are the ones at risk in the post-July regime.
Document substantial transformation to a USTR audit standard. Most manufacturers we audit have substantial-transformation documentation that would survive a customs review under current standards but would not survive a more aggressive review. Tighten the file now, while there is bandwidth, rather than during a customs inquiry.
Model the post-July range as a planning band, not a point estimate. The single most common error we are seeing is companies presenting a single-line “post-July tariff” assumption to their boards. The honest representation is a band: a low case (Scenario A), a base case (Scenario B), and a downside case (Scenario C), with sensitivities reported against each. Boards have not been receiving this. The companies that present it earn credibility before the resolution lands.
The closing
The honest summary is that the window is the planning horizon and the post-July regime is the conversation. The companies that absorb that framing get to July with a tightened RVC file, a clean substantial-transformation record, and a decision register that maps each scenario to a pre-decided action. The companies that treat the post-SCOTUS environment as a return to normal arrive at July without any of those three things, and the regime change reads as a surprise rather than an expected event.
If you are running a 2026 site selection, capacity expansion, or near-term sourcing decision against the Mexico base, the question to bring to a discovery call is not “what will the post-Section-122 tariff be?” — that is unknowable today. The question is: “given this operation’s RVC profile, supply-chain composition, and decision timeline, what is the right move during the window and what is the playbook for each post-July scenario?” That conversation we are happy to have.