Front-Running the Next Tariffs: We’ve Seen This Movie Before
The Supreme Court’s decision holding that the International Emergency Economic Powers Act (IEEPA) does not authorize tariffs has created an unusual near-term setup: a temporary “tariff valley” that could trigger another wave of import stockpiling in the months ahead.
With the IEEPA tariff regime struck down on statutory grounds, the administration pivoted to Section 122 of the Trade Act of 1974, an authority designed to address short-term balance-of-payments problems. The White House initially described the new measure as a ten percent ad valorem import duty for 150 days, and officials have suggested the rate could be increased to 15 percent.
On its own, a temporary surcharge doesn’t sound like an invitation to surge imports. But firms don’t plan around today’s tariff. They plan around the tariff regime they expect. The administration has made clear it intends to pursue higher and more durable tariffs that it believes it can levy through other statutes, particularly national-security actions under Section 232 and unfair-trade investigations under Section 301 and 302 of the Trade Act.
That sequencing creates the valley. If businesses believe the Section 122 period is a bridge to a tougher regime later, the rational response is front-running the hike. You ramp up imports now so that you bring as much merchandise as you can into the U.S. under the lower duties.
Those Who Remember Recent History Are Doomed to Watching It Repeat
This isn’t theoretical. It just happened. In 2025, the prospect of higher tariffs produced a front-loading boom. Bank of America estimates the trade deficit widened by roughly 50 percent at the peak of the surge as firms rushed shipments in ahead of the policy wave, and then compressed afterward as those inventories were drawn down.
If businesses expect a higher-tariff regime by summer, March, April, and May become prime front-running months. If the transition is expected to be slower, the surge spreads out. Either way, the incentive is the same: if you’re going to need the inventory anyway, the cheapest and least risky choice is to buy during the window. (Of course, there’s some limit to this: stocking up too much inventory is risky since you don’t know what future demand will be.)
What to watch is not just the headline deficit, but the composition of imports. The clearest signals of stockpiling will probably show up in durable goods and intermediate inputs. This is merchandise with long shelf lives, somewhat predictable demand, and supply chains that are expensive to disrupt. If those categories accelerate over the next few months, it’s a tell that firms are exploiting the tariff valley.
The broader point is that tariff transitions rarely deliver clean, immediate improvements in the trade data. They create deadline effects. Tariffs may influence sourcing and production over time, but in the short run they often shift the timing of imports around, widening the deficit first and only later producing any offset. If the U.S. is entering a tariff valley now, the next few trade reports may look like a step backward even as they reflect the most rational possible response to the policy path ahead.
A Test of the Pass-Through Theory
A tariff-valley import surge may also make headline GDP look weaker even if underlying demand is solid. In the national accounts, a jump in imports deepens the net-export drag. Inventory accumulation can offset that—goods that arrive and sit on shelves show up as higher private inventories, which count as investment. But the two don’t always line up neatly in the same quarter. Timing, valuation, and measurement can push the import hit and the inventory offset into different periods. So, if the surge hits late in the quarter, don’t be surprised if first-quarter GDP looks softer than the underlying pace of activity would suggest.
One final thought: the tariff valley may offer a real-world test of the claims that businesses are passing on almost all of the tariffs to customers. If tariffs are largely passed through into consumer prices, the marginal price pressure on newly ordered tariff-exposed goods should ease while the effective tariff rate is lower. That should mean lower prices than we’d see otherwise and an inflationary path lower than what was previously expected. Of course, we might just find out that the pass-through theory is wrong.
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