The US switched from reciprocal IEEPA tariffs to a flat Section 122 surcharge after a Supreme Court ruling. President Donald Trump set the surcharge at 10%, then raised it to 15% on 22 February.
This shift lowers effective tariff rates for several Asian exporters. Under the new 15% rate, China and India see tariff cuts of 7.1 points and 5.6 points, respectively.
Sector Tariff Relief Concentrated
The largest drops in tariff impact are in sectors that were hit hardest by the IEEPA measures. These include apparel, toys, games and sport, furniture, lighting, electrical machinery, and aircraft.
These product groups also match areas where Asian producers control a large share of global supply. Because the gap between the old IEEPA tariffs and the new 15% surcharge is wider, the tariff burden on exports in these categories falls.
Now that the move to a flat 15% Section 122 tariff is in place, the early uncertainty has faded. The focus should be on the clear winners of this policy, which delivered meaningful relief versus the prior IEEPA tariffs. Data from the past twelve months supports this, showing stronger export competitiveness for key Asian economies.
For traders, this points to derivatives tied to Chinese and Indian equities that gained the most from the change. China’s Caixin Manufacturing PMI has held up, staying above 50 for much of the last year, which signals expansion. Tariff incidence for these countries has fallen, improving the outlook for export-focused companies.
Market and Derivatives Implications
This matters most in areas like apparel, toys, and electrical machinery, where Asian producers have high market share. During 2025, ETFs focused on Asian industrials and consumer discretionary sectors regularly beat broader indices. Implied volatility in these names has likely eased since the policy change, which can make options strategies such as selling puts on industry leaders more attractive.
We are closely watching U.S. retail sales for signs of weaker demand, since a flat 15% tariff can still push up consumer prices. The latest U.S. jobs report also showed wage growth cooling slightly to 3.9% year over year, which may limit consumer spending. That is a key risk for the ongoing profitability of Asian exporters.
The improved trade setup may also open opportunities in currency markets. A steadier export outlook can support currencies such as the Indian rupee and Vietnamese dong. Derivative positions on INR or VND versus the U.S. dollar may be used to hedge, or to express a view that this strength continues.
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