- New forced labor taxes cover 99.4% of US imports.
- Rebuilt tariff layers will not exceed ceilings in trade agreements.
- Recent measures include probes of excess capacity.
WASHINGTON: US President Donald Trump had no time for lengthy tariff probes when he returned to office last year and wanted to hammer trading partners immediately to wring concessions.
What followed was a chaotic start to a trade agenda that was eventually upended by a stinging Supreme Court defeat this year. Now he and his team are moving into a new phase to build a more durable US tariff wall using more traditional and court-tested trade laws, the ones he had little patience with 18 months ago.
His latest global tariff salvo – tariffs of 10% or 12.5% on 60 countries due to alleged weak enforcement of bans on forced labor – marks the first of numerous customs actions to be unveiled in the coming months. They include investigations into excess industrial capacity, alleged theft of intellectual property from Vietnam, and national security protections for strategic industries from semiconductors to robotics and industrial machinery.
“We are at the tail end of the beginning of the Trump tariff agenda,” said Dan Ujczo, associate general counsel at Canadian oil producer Cenovus Energy, who specializes in US-Canada trade. “Within the next few weeks, and certainly by the end of the summer, we will see large parts of President Trump’s trade policy fully in effect.”
This could bring more clarity and certainty to companies about Trump’s ultimate tariff structure, along with fears in trade ministries that they may have to cough up more concessions to protect access to a $3.4 trillion US import market.
Direct replacements
Trump’s new anti-forced labor duties imposed under Section 301 of the Trade Act of 1974, the unfair trade practice statute used against China during his first term, almost directly replace a global temporary 10% tariff that expired on Friday. They cover 99.4% of US imports, the US Trade Representative’s office said.
This reinstates part of Trump’s signature “Liberation Day” tariffs of 10%-50% on nearly every country, which the US Supreme Court struck down as illegal under an untested national emergency law Trump used to impose them.
Another part of the base tariffs is likely to be rebuilt by another Section 301 investigation into excess industrial capacity, targeting 16 major trading partners, including China, the EU, Japan, South Korea, Mexico and Vietnam. The ongoing investigation is aimed at industrial subsidies and other export-focused policies.
Amid a wider uproar over Trump’s move, some saw it as largely maintaining the status quo.
Mark Bissell, CEO of Michigan-based vacuum maker Bissell Inc, said the latest tariffs were largely what the company expected and that it had not front-loaded inventory from China and elsewhere to try to beat them.
“We continued to operate the business based on the belief that rates would remain in the 10-15% range,” Bissell said in an email to Reuters.
Budget impact
Trump’s push for quick but untested tariffs right out of the gate did four things. It put extra costs on retailers and other import-dependent industries; it brought dozens of trading partners to the negotiating table, making concessions for lower rates; it led to swift retaliation and tariff escalation from China that led to a delicate truce; and it filled American coffers with hundreds of billions of dollars.
The Liberation Day tariffs alone brought in $166 billion in revenue, a major offset to a growing federal deficit, but refunds to importers have now turned those collections into the negative.
The 150-day temporary tariffs, based on a law meant to ease balance-of-payments crises, have added $31 billion in estimated revenue through July 5. But if a federal court ruling against them stands, that money is also subject to repayment.
With U.S. public debt approaching $40 trillion, Josh Lipsky, chair of international economics at the Atlantic Council, said successive administrations may become dependent on tariff revenue that is likely to be sustained.
“The customs wall is being rebuilt strong brick by strong brick, and it is very durable,” Lipsky said.
Trump’s broad use of Section 301 in the forced labor case prompted an immediate legal challenge from small businesses, but trade and legal experts say it will take time to play out. The statute has a solid track record in the courts, and judges may be reluctant to enjoin actions aimed at limiting forced labor and lowering barriers to US goods.
More to come
US Trade Representative Jamieson Greer made it 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 that this administration is using have changed, but the trade strategy has not,” Greer told the US Senate Finance Committee.
Greer, who did not commit to a timeline for the industrial capacity studies, has said the layers of tariffs being rebuilt will not exceed caps included in deals he has negotiated, including 15% for the EU, Japan and South Korea and higher rates for Southeast Asian countries.
Administration officials say that while China is considered the world’s largest source of excess production, its rates will not exceed the roughly 20% cap agreed to by Trump and Chinese President Xi Jinping last November, on top of the 25% tariffs from his first term.
Some nominal – or announced – tariffs may be higher than the rates actually applied, which analysts say could be an enforcement mechanism for countries to stick to agreed trade deal terms.
Still, some things continue to come out of the blue, including 50% tariffs on Canadian beer, dairy products, hockey sticks and other 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.
This propensity for spontaneous rate announcements remains a persistent risk, said Eswar Prasad, a business professor at Cornell University and former head of the International Monetary Fund’s China division. “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.”
