- New taxes on forced labor cover 99.4% of US imports.
- The reconstructed tariff layers will not exceed the maximum limits in the trade agreements.
- The latest actions include investigations into excess capacity.
WASHINGTON: US President Donald Trump had no time for lengthy tariff investigations when he returned to office last year as he wanted to immediately pressure his trading partners for concessions.
What followed was a chaotic start to a trade agenda that was ultimately upended by a tough Supreme Court defeat this year. Now he and his team are entering a new phase of building a more durable U.S. tariff wall using more traditional, court-tested trade laws — the ones he had little patience for 18 months ago.
Its latest global tariff salvo (10% or 12.5% tariffs on 60 countries for allegedly weak enforcement of forced labor bans) marks the first of numerous tariff actions that will be unveiled in the coming months. They include investigations into industrial overcapacity, alleged theft of intellectual property by Vietnam and national security protections for strategic industries, from semiconductors to robotics and industrial machinery.
“We are at the end of the beginning of Trump’s tariff agenda,” said Dan Ujczo, associate general counsel at Canadian oil producer Cenovus Energy, which specializes in U.S.-Canada trade. “In the coming weeks, and certainly towards the end of the summer, we will see much of President Trump’s trade policy fully in effect.”
This could bring more clarity and certainty to businesses about Trump’s final tariff structure, along with fears in foreign trade ministries that they will have to make more concessions to protect access to a $3.4 trillion US import market.
Direct replacements
The new anti-forced labor tariffs imposed by Trump under Section 301 of the Trade Act of 1974, the unfair trade practices statute used against China during his first term, almost directly replace a temporary 10% global tariff that expired on Friday. They cover 99.4% of U.S. imports, the U.S. Trade Representative’s office said.
This reconstructs part of Trump’s signature “Liberation Day” tariffs, of 10% to 50% on almost all countries, which the US Supreme Court declared illegal under an untested national emergency law that Trump used to impose them.
Another portion of the base tariffs is likely to be rebuilt through another Section 301 investigation into industrial overcapacity, targeting 16 major trading partners, including China, the EU, Japan, South Korea, Mexico and Vietnam. That ongoing investigation targets industrial subsidies and other export-focused policies.
Amid a broader uproar over Trump’s move, some saw it as largely maintaining the status quo.
Mark Bissell, chief executive of Michigan-based vacuum maker Bissell Inc, said the new tariffs were largely what the company anticipated and that it had not anticipated inventory from China and elsewhere to try to beat them.
“We continue to run the business based on the belief that tariffs would remain in the 10-15% range,” Bissell said in an email to Reuters.
Budget impact
Trump’s bid for quick but untested tariffs from the start accomplished four things. Increased additional costs to retailers and other import-dependent industries; brought dozens of trading partners to the negotiating table, winning concessions for lower rates; provoked swift retaliation and a tariff escalation by China that led to a delicate truce; and filled American fiscal coffers with hundreds of billions of dollars.
The Liberation Day tariffs alone generated $166 billion in revenue, a significant offset to a growing federal deficit, but refunds to importers have now turned those revenues into the negative.
The temporary 150-day tariffs, based on a law intended to quell balance of payments crises, have added $31 billion in assessed revenue through July 5. But if a federal court ruling against you is upheld, that money is also subject to repayment.
With U.S. public debt approaching $40 trillion, Josh Lipsky, president of international economics at the Atlantic Council, said subsequent administrations may become addicted to tariff revenues that are likely to be sustained.
“The tariff wall is being rebuilt brick by brick and is very durable,” Lipsky said.
Trump’s widespread use of Section 301 in the forced labor case sparked an immediate legal challenge from small businesses, but legal and business experts say this will take time to come to fruition. The statute has a strong track record in the courts, and judges may be reluctant to prohibit actions aimed at curbing forced labor and reducing barriers to American products.
More to come
U.S. Trade Representative Jamieson Greer made clear this week that Trump will use everything at his disposal to impose tariffs to restore production and reduce the trade deficit.
“The specific authorities this administration is using have changed, but the trade strategy has not,” Greer told the US Senate Finance Committee.
Greer, who has not committed to setting a timetable for investigations into industrial capacity, has said the tariff levels being reconstructed will not exceed limits included in the agreements he has been negotiating, including 15% for the EU, Japan and South Korea and higher rates for Southeast Asian countries.
Administration officials say that although China is seen as the world’s largest source of excess manufacturing, its rates will not exceed the cap of around 20% agreed to by Trump and Chinese President Xi Jinping last November, which comes on top of the 25% tariffs from his first term.
Some nominal (or announced) tariffs can be higher than actual applied rates, which analysts say can be an enforcement mechanism for countries to meet agreed terms in trade agreements.
Still, some things keep coming out of the blue, including the 50% tariffs on beer, dairy, hockey sticks and other Canadian products that Trump announced Monday over Ottawa’s refusal to make trade concessions and his threat to cut off all trade with Spain for failing to meet NATO military spending targets.
That propensity for spontaneous tariff announcements remains an ongoing risk, said Eswar Prasad, a trade professor at Cornell University and former head of the International Monetary Fund’s China department. “Trump’s eagerness to impose tariffs to address a wide range of grievances will not only continue to disrupt the global trading system, but will have significant adverse effects on American households and businesses.”
