- New forced labor taxes cover 99.4% of US imports.
- The reconstructed tariff levels will not exceed the ceilings of the trade agreements.
- Latest actions include investigations into excess capacity.
WASHINGTON: US President Donald Trump had no time for lengthy customs investigations when he returned to power last year, immediately wanting to hammer his trading partners to extract concessions from them.
What followed was a chaotic start to a trade agenda that was ultimately upended by a crushing defeat at the Supreme Court this year. Today, he and his team are entering a new phase aimed at building a more durable U.S. tariff wall using more traditional, court-tested trade laws, ones for which he had little patience 18 months ago.
Its latest global tariff salvo – duties of 10% or 12.5% on 60 countries due to allegedly weak enforcement of forced labor bans – marks the first of many tariff measures to be unveiled in the coming months. They include investigations into excess industrial capacity, alleged theft of intellectual property by Vietnam, and national security protections for strategic industries, from semiconductors to robotics and industrial machinery.
“We’re at the tail end of the beginning of Trump’s tariff agenda,” said Dan Ujczo, deputy general counsel for Canadian oil producer Cenovus Energy, who specializes in U.S.-Canada trade. “In the coming weeks, and certainly by the end of the summer, we will see much of President Trump’s trade policies fully implemented.”
That could bring more clarity and certainty to businesses about Trump’s final tariff structure, while raising concerns among trade ministries that they will have to cough up more concessions to protect access to a $3.4 trillion U.S. import market.
Direct replacements
Trump’s new anti-forced labor measures imposed under Section 301 of the Trade Act of 1974, the unfair trade practices law used against China during his first term, almost directly replace a temporary global 10% tariff that expired Friday. They cover 99.4% of US imports, the office of the US Trade Representative said.
This restores part of Trump’s “Liberation Day” tariffs of 10 to 50 percent on nearly every country that the U.S. Supreme Court declared illegal under an untested national emergency law that Trump used to impose them.
Another portion of the base tariffs will likely be replenished through another Section 301 investigation into excess industrial capacity, targeting 16 major trading partners, including China, the EU, Japan, South Korea, Mexico and Vietnam. This ongoing investigation targets industrial subsidies and other export-oriented policies.
Amid broader outcry over Trump’s decision, some saw it as largely maintaining the status quo.
Mark Bissell, CEO of Michigan-based vacuum maker Bissell Inc., said the new tariffs were largely what the company had anticipated and that it had not concentrated its inventory from China and elsewhere to try to beat them.
“We continued to operate our business with confidence that tariffs would remain in the 10-15% range,” Bissell said in an email to Reuters.
Budget impact
Trump’s gamble on rapid but untested tariffs from the start had four effects. This has led to additional costs for retailers and other import-dependent industries; he brought dozens of trading partners to the negotiating table, offering concessions on lower rates; this provoked rapid retaliation and tariff escalation from China that led to an uneasy truce; and it filled America’s tax coffers with hundreds of billions of dollars.
The Liberation Day tariffs alone generated $166 billion in revenue, a major offset for a growing federal deficit, but refunds to importers have now made that revenue negative.
The 150-day temporary tariffs, based on a law intended to ease balance of payments crises, added $31 billion in tax revenue through July 5. But if a Federal Court decision against them is upheld, this money will also be subject to reimbursement.
As the U.S. public debt approaches $40 trillion, Josh Lipsky, president of international economics at the Atlantic Council, said future administrations could become dependent on tariff revenues that are likely to be sustainable.
“The fare wall is being rebuilt brick by solid brick, and it’s 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 business and legal experts say it will take time to come to fruition. The law has proven itself in court, and judges may be reluctant to ban actions aimed at combating forced labor and lowering barriers to U.S. products.
More to come
U.S. Trade Representative Jamieson Greer made clear this week that Trump would use everything at his disposal to impose tariffs to relocate production and reduce the trade deficit.
“The specific authorities used by this administration have changed, but the trade strategy has not,” Greer told the U.S. Senate Finance Committee.
Greer, who did not commit to a timetable for the industrial capacity surveys, said tariff levels under reconstruction will not exceed caps included in deals he negotiated, including 15% for the EU, Japan and South Korea and higher rates for Southeast Asian countries.
Administration officials say that even though 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, which is on top of the 25% tariffs from his first term.
Some nominal – or announced – duties may be higher than the rates actually applied, which analysts say could provide an enforcement mechanism for countries to stick to the terms of agreed trade deals.
Yet some things continue to appear out of nowhere, including the 50% tariffs on Canadian beer, dairy, hockey sticks and other products announced by Trump on Monday due to Ottawa’s refusal to make trade concessions and its threat to cut off all trade with Spain for failing to meet NATO military spending targets.
This propensity for spontaneous tariff announcements remains an ongoing risk, said Eswar Prasad, a business professor at Cornell University and former head of the International Monetary Fund’s China department. “Trump’s willingness to impose tariffs to address a range of grievances will not only continue to disrupt the global trading system, but will also have significant negative effects on American households and businesses.”
