Factbox: Countries and Industries Most Exposed to IEEPA-Based Tariffs

The U.S. administration's use of the International Emergency Economic Powers Act (IEEPA) has created a three-tiered tariff regime, targeting specific countries and industries based on distinct policy objectives. The first category is the fentanyl-linked tariffs, which apply to imports from China, Mexico, and Canada. These duties are framed as a response to drug trafficking concerns, creating a direct link between trade policy and law enforcement.

The second and most expansive category is the broad "reciprocal" tariff framework, established by Executive Order 14257. This mechanism targets countries with large U.S. goods trade deficits, imposing a duty equal to the deficit percentage. The baseline rate for this reciprocal framework is 10%. However, the administration has applied country-specific rates above this baseline, with a notable example being a 40% tariff on certain goods from the European Union. For other goods from the same region, the rate is set at 10%. This creates a tiered exposure within a single trading partner, where the tariff rate depends on the specific product category.

The third category consists of punitive levies against countries for non-trade political reasons. These tariffs are not tied to trade balances or drug policy but are instead used as leverage in broader geopolitical or diplomatic disputes. The evidence indicates that countries like the UK, Japan, South Korea, Vietnam, and Switzerland have managed to avoid these punitive rates by striking tariff-reduction deals with the U.S. in exchange for market access and investment commitments, highlighting the transactional nature of this third tier.

This three-part structure means that a single country can face multiple tariff regimes simultaneously. For instance, a European Union exporter might pay a 40% rate on certain goods under the reciprocal framework while facing a separate, potentially higher, punitive rate for other products, depending on the political calculus of the moment. The legal foundation for all these actions is now before the Supreme Court, with the potential for a $150 billion refund to importers if the court finds them illegal.

Key Industries and Legal Status

The legal standing of this three-tiered tariff regime is now in the hands of the Supreme Court, which is set to rule on Friday. The potential outcome is a financial earthquake: the administration could be forced to refund nearly $150 billion in duties already paid by importers if the court finds the tariffs illegal. This looming decision has already triggered a wave of corporate resistance, with major U.S. and multinational firms launching lawsuits to recoup their costs.

The most exposed sectors are those that are not protected by critical supply chain exemptions. While pharmaceuticals, energy, agricultural commodities, services, and aircraft have been largely shielded, the litigation highlights the vulnerability of consumer-facing and industrial goods. The list of plaintiffs includes Costco, Revlon, Ray-Ban maker EssilorLuxottica, Bumble Bee Foods, Yokohama Tire, and Kawasaki Motors. These companies represent a broad cross-section of industries-from retail and consumer staples to automotive and industrial manufacturing-that rely heavily on imported components and finished products. Their legal challenge underscores the significant corporate exposure and the potential for a sudden, large-scale cash outflow if the court rules against the administration.

Treasury Secretary Scott Bessent has warned that the court's decision may not be a clean win or loss. He expects a "mishmash" ruling, suggesting the justices could grant limited powers under the IEEPA and require only partial repayments. This would be a middle path, preserving some of the administration's tariff authority while imposing constraints. The court has the option to narrow the scope of existing tariffs, limit their future application, or mandate a partial refund, creating a complex new operating environment. For now, the legal status remains in suspense, with the court's imminent decision poised to reshape trade policy, fiscal conditions, and corporate earnings.

Exemptions, Stacking Rules, and Trade Impact

The operational reality of this tariff regime is defined by layers of complexity, from specific product exemptions to intricate rules that govern how duties are applied. This maze of exceptions and stacking prohibitions creates significant compliance hurdles and cost uncertainty for importers.

A critical set of legal exemptions shields certain goods from the reciprocal tariff framework. These are detailed in Annex I to Executive Order 14323, which lists specific 8-digit HTSUS subheadings for products like medical devices, certain agricultural inputs, and some industrial chemicals. For these items, the 10% baseline tariff does not apply, providing a clear carve-out for essential or sensitive sectors. Yet, the system's design ensures that even within this list, the application of other tariffs-such as those under Section 232 on steel or aluminum-can still create a layered cost burden.

Adding another layer of complexity are the "unstacking" provisions. These rules are designed to prevent a single imported good from being hit by multiple, overlapping tariffs. For example, products subject to the auto-related Section 232 tariffs are explicitly excluded from also being subject to the reciprocal, Brazil/Russian Oil, or Canada/Mexico IEEPA tariffs. The purpose is to avoid the kind of cascading duty that would make imports prohibitively expensive. However, the rules are not a blanket exemption. Goods with mixed content, such as those containing both copper and steel, can still be subject to all applicable tariffs. This creates a need for meticulous product classification and value attribution, a process that is both costly and prone to error.

The impact of this entire regime on trade flows is already visible. The U.S. goods trade deficit for October 2025 hit its lowest level since 2009. While this narrowing is influenced by multiple factors, including strong domestic demand and shifting supply chains, the targeted tariffs are a major contributing force. By raising the cost of imports from deficit countries, the policy has demonstrably altered the calculus for global trade, accelerating the movement of goods and investment away from the targeted partners. This shift, however, comes with a trade-off: it introduces volatility and friction into established supply networks, raising costs for businesses and consumers alike. The system's complexity-its exemptions, its stacking rules, and its tangible effect on trade balances-means that the path forward is not one of simple tariff application, but of navigating a deeply layered and evolving regulatory landscape.