Stay ahead of the next tariff: We’ve seen this movie before.

The recent Supreme Court ruling has decided that the International Emergency Economic Powers Act (IEEPA) does not give authority for imposing tariffs. This creates a temporary “tariff trough,” which could lead to a surge in imports in the coming months.

Since the legal basis for IEEPA tariffs has been removed, the administration is now considering Section 122 of the Trade Act of 1974, intended to handle short-term payment balance issues. Initially, the White House mentioned a 10% import tariff lasting 150 days, although it seems the rate might climb to 15%.

While a temporary tariff by itself may not draw an immediate spike in imports, companies are not making plans based solely on current tariffs. They’re anticipating a more complex tariff structure. The administration has indicated its aim for “higher and more durable tariffs.” It seems there’s a belief that tariffs could be implemented via other legislation, particularly related to national security under Section 232 of the Trade Act and investigations into unfair trade practices.

This scenario sets the stage for a potential valley. If businesses think the Section 122 phase leads to stricter rules ahead, they’ll likely rush to increase imports now to capitalize on these lower tariffs.

Those who remember recent history are doomed to see history repeat itself

This isn’t just a hypothetical situation; it’s something we’ve witnessed recently. Back in 2025, the anticipation of higher tariffs led to an early surge in imports. According to Bank of America, the trade deficit peaked at around a 50% increase as companies sought to ship ahead of forthcoming policies, later narrowing as stock was depleted.

If firms are expecting tariff increases by summer, then March, April, and May could see the biggest boosts. Even if adjustments take time, the incentives remain relevant. For those needing stock, buying during this period is often the most cost-effective and least risky. Of course, there are dangers to overstocking, particularly with uncertain future demand.

What’s crucial to monitor isn’t solely the numbers highlighted in headlines but rather the types of imported goods. Signs of stockpiling are likely to be most evident in durable goods and intermediate inputs, as these are products with long shelf lives and relatively predictable demand. If these categories see an increase in the coming months, it would suggest that companies are taking advantage of the tariff trough.

Generally speaking, transitions in tariffs don’t usually lead to immediate, clear improvements in trade statistics. They often cause a deadline effect. While tariffs can influence procurement and production over time, they frequently alter the timing of imports first, widening deficits before any offsets occur. If the U.S. is entering a tariff trough, the next few trade reports may appear negative, even if they reflect rational responses to anticipated policy changes.

Testing the pass-through theory

The significant rise in imports during this tariff trough could indicate that while headline GDP may appear weak, actual demand remains strong. The spike in imports may create greater resistance against net exports. Of course, inventory accumulation could mitigate that. Items arriving to sit on shelves count as personal inventory and represent an investment. However, these dynamics don’t always align perfectly within the same quarter. Timing and measurement discrepancies can lead to import surges and inventory increases falling into different periods. So, if this surge occurs later in the quarter, it’s possible first-quarter GDP might seem slower than the activity level actually would suggest.

Lastly, consider the implications of a tariff trough. This represents a real-world test of the idea that companies usually pass on tariffs to customers. If most tariffs are added to consumer prices, the effective tariff rate should decrease, potentially easing price pressure on newly ordered tariffed goods. This might lead to lower prices than would typically be expected, as well as a more favorable inflation trajectory. However, it’s also possible that this pass-through theory could prove incorrect.