International trade policy has surged back into the spotlight following a fresh tariff dispute between the U.S. and Canada, bringing long-standing allies into direct economic friction.
Following a Supreme Court ruling that stripped away the legal backing for sweeping global tariffs introduced early in his second term, President Donald Trump has pivoted to alternative statutory mechanisms to keep import taxes alive.
While these current duties lack the sheer breadth and height of the initial “Liberation Day” announcements, trade analysts note that the administration has successfully reclaimed much of its original protectionist agenda.
According to Tax Foundation senior economist Erica York, overall duty levels sit somewhere between where they were at the start of the administration and their early 2025 peak. “They have slowly been climbing their way back up, and they may not be done climbing yet,” she noted.
Here is a breakdown of where things stand regarding the second-term tariff strategy.
Current Tariff Levels
Data from the Tax Foundation puts the average U.S. tariff rate at 7.2%. Aside from the brief spike in early 2025 prior to the judicial intervention, this represents the highest average rate since 1967.
When evaluated through a different lens—adjusting the average tariff rate against the total value of incoming shipments—the figure has jumped from 2.8% at the onset of the administration to 12.5% today. This metric previously soared to a high of 21% before retreating post-ruling.
Presently, a clear majority of foreign goods entering the U.S. face some form of duty, though targeted exemptions remain for specific agricultural commodities, generic pharmaceuticals, and select goods following intense lobbying from corporate and legislative figures.
Ross Burkhart, a Boise State University political scientist focusing on trade, points out that the roster of penalized nations has shrunk from roughly 180 on Liberation Day to about a third of that total. Nevertheless, core economic partners—including the European Union, the U.K., Japan, South Korea, and Taiwan—now face baseline levies ranging from 10% to 12.5%, according to official trade office updates.
The New Legal Foundations for Tariffs
To circumvent the Supreme Court’s earlier block, the administration has relied on a patchwork of historical trade statutes.
Among these is Section 122 of the Trade Act of 1974, which permits a temporary 15% import surcharge for up to 150 days to address severe balance-of-payments deficits or defend the dollar against sharp foreign exchange depreciation.
The administration has also utilized Section 301 of the same act, allowing targeted sector- or product-specific duties when foreign practices are found to unfairly burden U.S. commerce through trade agreement violations.
Additionally, Section 232 of the Trade Expansion Act of 1962 continues to serve as a vehicle for duties justified by national security concerns.
For the recent measures directed at Canada, the White House turned to Section 338 of the Tariff Act of 1930. This statute allows duties of up to 50% if the International Trade Commission determines a trading partner discriminates against American goods like automobiles, agricultural items, and alcoholic beverages.
Unlike the broad, sweeping powers initially struck down by the judiciary, these alternative tools generally demand formal investigations, carry specific duration caps, or limit the ceiling on potential tax rates.
Certain measures—particularly the Section 338 actions targeting Canada—could face legal hurdles. Should Democrats capture majorities in Congress during the midterm elections, legislative pushback is likely, given that Republican lawmakers have largely opted against challenging the executive branch’s trade maneuvers.
The Status of Tariff Refunds
Because the Supreme Court invalidated the initial wave of duties, the federal government has been legally mandated to issue refunds on previously collected monies, a process visible in shifting federal revenue data.
Monthly tariff revenue climbed dramatically from roughly $7 billion prior to the administration’s return to between $20 billion and $30 billion between April 2025 and April 2026. By May 2026, collections plummeted near zero, while June and July recorded net-negative revenue as payouts outpaced incoming funds—a trend expected to reverse once the refund backlog clears.
While the administrative rollout of refunds has progressed smoothly, experts note structural disparities in how businesses experience the process.
“Smaller businesses have a harder time receiving these refunds, while the Walmarts and Amazons of the world do just fine,” Burkhart observed.
Importing companies receiving the checks are under no legal requirement to pass those funds down to everyday consumers who absorbed the higher retail costs while the original tariffs were in effect.
Consequently, York noted, the refunds “may not match up with who ultimately bore the burden of the tariff.”
Broader Economic Fallout
According to York, the economic fallout of the tariffs has not been as catastrophic as early doomsday predictions suggested, largely due to the lower effective rates compared to the peak of early 2025. At the same time, they have fallen short of the sweeping economic benefits promised by the administration.
Surveys of corporate leadership indicate that the constant cycle of implementing and rolling back duties has injected unpredictability into long-term planning.
Firms have frequently “paused on hiring decisions, or paused on expansions, or had to forego other investments,” York explained. “So it certainly was disruptive.”
This operational friction is reflected in broader macroeconomic indicators. Despite campaign promises of unprecedented economic expansion, quarter-over-quarter GDP growth has remained capped at or below 2.1% for three consecutive quarters—a sluggish pace that Burkhart views as unhelpful for domestic manufacturing revitalization.
Further complicating the goal of bringing industrial jobs back to domestic soil, manufacturing employment contracted by 62,000 positions between January 2025 and July 2026.
Meanwhile, the U.S. goods trade deficit failed to shrink over the first year of the term, experiencing a slight expansion.
Inflation-adjusted wages have seen modest growth, edging up about 1.3% over the past five quarters, though those gains face mounting pressure from persistent inflation driven by oil supply constraints connected to the conflict in Iran.