Southeast Asia’s Tariff Breather: Trump’s Duty Reset Offers Relief, But Uncertainty Looms Large

The U.S. Supreme Court’s February 2026 ruling striking down Trump’s IEEPA tariffs has triggered a 15% Section 122 duty reset — offering ASEAN economies a meaningful, if fragile, reprieve. Here’s what it means for Vietnam, Thailand, Indonesia, and the region’s future trade outlook.

It took a landmark Supreme Court ruling, a furious presidential response, and one very late Friday night to reset the global trade architecture that had reshaped Southeast Asia’s economy over the past year. On February 20, 2026, the U.S. Supreme Court ruled 6-3 in Learning Resources, Inc. v. Trump that the International Emergency Economic Powers Act (IEEPA) — the legal scaffolding for President Trump’s sweeping “Liberation Day” reciprocal tariffs — does not authorize the president to impose tariffs. By midnight on February 24, those duties were gone, replaced by a fresh 15% global import levy under the narrower authority of Section 122 of the 1974 Trade Act.

For Southeast Asia, the shift is consequential. Countries like Vietnam, Malaysia, Thailand, and Indonesia had spent nearly a year negotiating under the shadow of reciprocal tariff rates ranging from 19% to 46%. Now, with a uniform 15% Section 122 duty in place, several of those nations suddenly find themselves paying less to access the world’s largest consumer market than they agreed to in bilateral deals. That is a remarkable turn of events — and one that raises as many questions as it answers.

The Reset Explained

The Supreme Court’s majority opinion was sharp and categorical. As SCOTUSblog summarized, IEEPA’s language — permitting the president to “regulate importation” during emergencies — does not plainly authorize the imposition of tariffs, which are a distinct form of taxation historically reserved for Congress. Applying its “major questions” doctrine, the court held that such a consequential delegation of the taxing power requires explicit congressional authorization.

Trump’s response was immediate and combative. Hours after the ruling, he invoked Section 122 to impose a 10% global duty. By the following day, he announced via Truth Social that the rate would rise to 15%, effective February 24, 2026 at 12:01 a.m. EST — one minute after the IEEPA duties legally ceased. The White House framed the move as correcting a “fundamental international payment problem,” the statutory trigger required under Section 122.

The critical difference from IEEPA: Section 122 comes with a hard ceiling of 150 days. Unless Congress votes to extend it — a fraught prospect with midterm elections looming in November — the duties expire automatically around mid-July 2026. As the Tax Foundation notes, should the Section 122 tariffs expire without replacement, the effective U.S. tariff rate would fall to approximately 5.6%, the highest level since 1972 but far below the pre-ruling average of nearly 17%.

Section 232 tariffs on steel, aluminum, and automobiles remain fully intact. And the administration has signaled it will launch multiple Section 301 investigations, meaning sector-specific tariff actions on semiconductors, pharmaceuticals, and drones could follow.

Economic Wins for the Region

For the export-driven economies of ASEAN, the math of the new regime is, at least in the immediate term, encouraging.

DBS Group Research economists Radhika Rao and Chua Han Teng published analysis showing that under the MFN-plus-15% Section 122 framework, Malaysia, Thailand, Vietnam, and Indonesia all see meaningful reductions in their effective U.S. tariff rates. Citing Global Trade Alert data, DBS estimates reductions of approximately 1.7 to 3.2 percentage points for these four economies compared to their previous rates under negotiated IEEPA-era deals.

Effective Tariff Rate Comparison: Key ASEAN Economies

Sources: DBS Group Research, Global Trade Alert, Tax Foundation (February 2026)

Singapore is the notable outlier: its previously favorable 10% baseline has been replaced by the uniform 15% rate, technically raising its effective burden by roughly 1.1 percentage points. That said, DBS notes Singapore retains the lowest effective tariff rate within ASEAN-6 because its MFN duties on most goods are already near zero.

For Thailand, the impact is tangible and immediate. Thailand Business News reports that Finance Minister Ekniti Nitithanprapas called the reset a “more level playing field” that strengthens Thailand’s appeal as a manufacturing and investment hub. Thailand’s exports to the U.S. exceeded $50 billion in 2025, and the Thai baht has already strengthened — moving from 35.2 to 34.8 against the dollar in the days following the ruling.

Consider the position of a furniture manufacturer in the outskirts of Ho Chi Minh City. Through 2025, her company faced the prospect of 25–46% tariffs on sofas and rattan sets shipped to American retailers. After months of uncertainty, she was exporting at a negotiated 20% rate — still punishing by historical standards. Today, she ships under a 15% blanket rate. Margins remain thin, but the difference between 20% and 15% on a container worth $80,000 in goods is real money. And she is not alone: the Vietnamese furniture sector, already a major beneficiary of the “China+1” supply chain diversification trend, now has new breathing room.

Vietnam’s broader tariff burden has fallen sharply, according to Seeking Alpha’s Asia trade analysis, which notes the reduction “widens Vietnam’s competitive edge in low-value-added exports and further embeds it as a key U.S.-bound production base.” Electronics assembly in Malaysia and non-exempt manufacturing in Indonesia face similarly improved conditions.

Lingering Risks

If the new tariff environment feels like relief, it also feels precarious — and deliberately so.

The 150-Day Clock. The most fundamental constraint on Section 122 is statutory. The clock started ticking on February 24, and it runs until approximately July 22, 2026. After that, the Trump administration needs congressional approval to extend the duties, pursue new bilateral agreements, or invoke yet another statutory authority. As Brookings scholars emphasized, this timeline is not incidental: it forces a tariff vote squarely into pre-midterm election season, adding genuine political complexity.

Legal Fragility. Section 122 is designed for balance-of-payments emergencies and has rarely been used. Asia Times notes that this authority is “considerably narrower than IEEPA provided,” and legal challenges to its application are already being anticipated by trade lawyers. A second Supreme Court rebuke — while not certain — cannot be dismissed.

The Deals That No Longer Make Sense. Perhaps most awkwardly, several ASEAN countries signed bilateral trade agreements under the coercive pressure of IEEPA tariffs that no longer exist. Indonesia is the starkest case: Jakarta signed a reciprocal trade agreement with Washington on February 19, 2026 — one day before the ruling — committing to a 19% tariff rate and a series of investment concessions. Under Section 122, Indonesia effectively faces a 15–17% effective rate without the deal’s obligations. As Asia Times observed, “for ASEAN countries, the ruling is neither a full reprieve nor a return to the pre-2025 trading environment. What it offers is breathing room.”

Trump appears acutely aware of this dynamic. He warned on Truth Social that countries “playing games” with the ruling “will be met with a much higher Tariff, and worse.” That threat carries weight: Section 301 investigations can produce targeted duties, and Section 232 national security probes remain in progress for semiconductors and pharmaceuticals — sectors vital to Malaysia, Singapore, and Vietnam.

Transshipment Risks Persist. For Vietnam in particular, a separate concern predates the ruling and remains unresolved. The Trump administration has long accused Vietnam of serving as a conduit for Chinese goods seeking to avoid U.S. duties. A 40% transshipment tariff was floated in mid-2025 trade negotiations. That proposal has not been formally rescinded, and stricter rules of origin enforcement could return as a policy lever.

Section 232 Remains. Steel, aluminum, and automobile tariffs are unaffected by the ruling. For Southeast Asian manufacturers that use these inputs — Thai automakers, Indonesian steelmakers — the underlying cost pressures from upstream tariffs have not disappeared. As the Tax Foundation calculates, Section 232 tariffs alone are expected to raise $635 billion over the next decade, costing U.S. households an estimated $400 on average in 2026.

Geopolitical Fault Lines

The ruling and its aftermath cannot be understood in isolation from the broader U.S.-China strategic competition that has made Southeast Asia a contested terrain for economic alignment.

China’s response to the IEEPA era was to accelerate its own trade courtship of ASEAN. As Al Jazeera reported, Beijing has “sought to offset losses in the U.S. market by strengthening trade ties with Southeast Asian nations and pursuing agreements with the European Union.” The Supreme Court ruling may temporarily reduce Beijing’s leverage — if U.S. tariffs on ASEAN are lower, the pressure to pivot further toward China eases — but it does not fundamentally alter the structural dynamic.

For ASEAN governments, the lesson of the past year is that dependence on any single superpower carries existential risk. Malaysia, as the 2025 ASEAN chair, pushed for deeper intra-ASEAN economic integration. The EU-Indonesia Free Trade Agreement is advancing. ASEAN members are quietly diversifying their trade portfolios in ways that will outlast any individual tariff ruling.

Meanwhile, the Brookings Institution’s tariff analysis notes that the administration remains likely to pursue “established trade measures permitting more narrowly levied tariffs” — including multiple Section 301 investigations — suggesting the era of unpredictable U.S. trade policy is not over. It has simply entered a new legal phase.

Looking Ahead

For policymakers, exporters, and supply chain strategists across Southeast Asia, the February 2026 tariff reset suggests a set of priorities for the months ahead.

Front-load where you can. Thai and Vietnamese exporters are already accelerating shipments to take advantage of the lower 15% window before July. This is rational — and may produce a brief burst in U.S.-ASEAN trade volumes in Q1–Q2 2026 that flatters the headline numbers.

Renegotiate carefully. Countries that signed deals at above-15% rates — including Indonesia and the Philippines — face a delicate diplomatic calculation. Walking away from agreements could trigger retaliation. But the legal basis for those deals has evaporated. Governments should pursue quiet renegotiation through technical channels while avoiding public confrontation.

Diversify trade partners. The structural argument for reducing dependence on the U.S. market has not weakened. The EU remains a high-priority destination. The Regional Comprehensive Economic Partnership (RCEP) framework offers deeper intra-Asian trade pathways. Malaysia’s push for bold ASEAN integration deserves support.

Watch Congress. The most underappreciated variable in Southeast Asia’s trade outlook is the U.S. congressional calendar. A vote to extend Section 122 tariffs would provide continuity; a failure to do so would create a different form of uncertainty. With the 2026 midterms shaping Republican priorities, a bipartisan bill on trade authority — flagged by Brookings as potentially “more consequential” than the Section 122 debate itself — could reshape the landscape entirely.

Monitor Section 301. The administration’s announced Section 301 investigations are likely to produce country-specific or sector-specific tariff proposals within months. Exporters in semiconductors, solar panels, electric vehicles, and pharmaceuticals should treat those investigations as active threats, not background noise.

The Supreme Court has delivered Southeast Asia a reprieve, but not a resolution. A 15% tariff where 20–25% once loomed is genuine progress. But a tariff architecture that expires in 150 days, faces legal scrutiny, and sits alongside an administration with multiple remaining tools for trade coercion is not the stable foundation that ASEAN’s export economies need to plan long-term investment decisions.

For the furniture exporter in Ho Chi Minh City, the Thai automotive supplier, or the Malaysian semiconductor packager, the message from this week’s dramatic Washington events is the same one they’ve been receiving for a year: stay nimble, hedge your exposure, and don’t mistake a pause for a peace treaty.

Readers and trade policy watchers should continue monitoring U.S. USTR announcements, Section 301 investigation timelines, and the congressional debate on Section 122 extension — all of which will define Southeast Asia’s trade environment through the remainder of 2026. The next inflection point arrives in July.

Key Data Points at a Glance

• Supreme Court Ruling: February 20, 2026 — IEEPA does not authorize presidential tariffs (6-3 decision)
• New Tariff Mechanism: Section 122, Trade Act of 1974 — 15% global duty, effective February 24, 2026
• Duration: 150 days (~July 22, 2026), requires congressional extension
• ASEAN Relief: Malaysia, Thailand, Vietnam, Indonesia see effective rate reductions of 1.7–3.2 percentage points (DBS/Global Trade Alert)
• Singapore: Effective rate rises ~1.1 pp but remains lowest in ASEAN-6
• Unchanged Tariffs: Section 232 duties on steel, aluminum, autos remain in force
• IEEPA Duties Collected Before Ruling: Estimated $160+ billion — subject to litigation over refunds
• Section 122 Revenue Forecast: $668 billion over 2026–2035 (Tax Foundation, combined with Section 232)
• U.S. Average Effective Tariff Rate: ~5.6% if Section 122 expires; highest since 1972