(June 3): The US is proposing new tariffs of at least 10% on imports from 60 trading partners in President Donald Trump’s biggest move to rebuild his protectionist wall since his earlier levies were struck down by the Supreme Court.
Following an investigation into how trade partners handle goods allegedly produced by forced labour, a 10% tariff rate would apply to imports from Canada, Mexico, the European Union (EU), Taiwan and the UK, among other places, according to a statement late on Tuesday from the Office of the US Trade Representative (USTR).
Products from other major economies, including China, India, Japan, South Korea, Brazil and Switzerland, would be subject to a 12.5% levy.
The USTR said it was imposing the lower rate on goods from economies that impose prohibitions on forced labour imports or have committed to doing so, while those “that have failed to impose and effectively enforce” them received a higher rate.
Beijing denied the allegations and criticised Trump’s move, while an official in Tokyo said Japan is in close contact with counterparts in Washington about the matter. The EU called it unjustified and added that the bloc would respect the terms of its trade accord with the US.
The move is a major step in Trump’s push to reinstate the tariffs he imposed during his first year in office before they were deemed unconstitutional. The recommended duties are a result of probes launched under a separate legal authority known as Section 301 of the Trade Act of 1974.
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A separate raft of 301 investigations includes a review of US trading partners’ excess manufacturing capacity, the findings of which may also be released soon. Trade analysts are speculating whether any future duties from that probe would be stackable on top of those proposed under the forced labour investigation.
“Trade partners will be understandably upset by this determination,” said Deborah Elms, the head of trade policy at the Hinrich Foundation in Singapore. “You have opened a door now for a whole lot of new tariff and non-tariff adjustments,” she added.
US stocks fell on Wednesday, with investors focused on tensions in the Middle East. In Europe, the main benchmark dropped as automakers such as Volkswagen AG and Mercedes-Benz Group AG declined.
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The levies arrive at a pivotal time for the global economy with financial markets already on edge over the Iran war and energy prices staying elevated. That has fuelled new fears about inflation, and in the US exacerbated affordability concerns among voters that threaten Trump’s Republican Party in November’s midterm elections.
The levies won’t go into effect immediately and are subject to a public comment and review period before implementation, which could result in changes before any duties are codified. Written comments are due to be submitted by July 6, and a Section 301 panel is expected to convene public hearings beginning on July 7, according to the notice.
With new tariffs comes additional complexity and costs, according to business groups.
“Applying a single investigatory framework across 60 economies, including long-standing US allies and parties to existing bilateral trade agreements, will create significant compliance uncertainty for businesses operating in global supply chains,” International Chamber of Commerce secretary general John Denton said in a statement on Wednesday.
The USTR investigated whether the economies involved had failed to impose a forced labour import prohibition or effectively enforce such a prohibition. “None of the 60 economies whose acts, policies, and practices are the subject of these investigations effectively enforce a forced labour import prohibition,” it found.
“This creates a dynamic where American workers are forced to compete globally on an unlevel playing field,” US Trade Representative Jamieson Greer said in a statement. “We will no longer tolerate this disparity.”
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Citing the Trafficking Victims Protection Reauthorization Act of 2005, the USTR flagged 34 goods in particular countries that are made with inputs produced with forced labour. Those included cotton used for garments, critical minerals for solar products, fish used for fish oil and fish meal, and palm fruit used palm oil.
The move will test the tolerance of the largest US economic partners, who have largely restrained from retaliating against Trump’s tariffs, opting instead to negotiate deals to lower import taxes and ensure market access.
“Any tariffs on Australian exports to the United States are unjustified and inconsistent with our free trade agreement,” Australia’s Trade Ministry said. India’s Commerce Ministry said in a statement that New Delhi “remains engaged with the US on the matter”.
The new levies also pose questions about the stability of a truce with China following a summit between Trump and counterpart Xi Jinping in May, which saw them agree to establish new boards on trade and investment to manage the relationship between the world’s two largest economies.
“Because it is not only targeting China, I believe there should still be some room for communication and dialog between Beijing and Washington,” said Zhu Feng, the dean of the School of International Studies at Nanjing University. “If additional Section 301 follow-up actions are rolled out successively, it will indeed pose new challenges to the ‘Beijing Consensus’.”
Beijing last month indicated that it would accept some increase in US tariffs to a level agreed upon in October.
Other investigations
There are also several proposed exceptions to the tariff regime.
Apparel and textile imports from some countries would be able to enter the US at a reduced tariff rate — with those quotas set according to the volume of US exports of textiles to those nations.
Other products are exempt from the tariffs entirely, including beef, tomatoes, bananas, coffee, orange juice and other food items. Metals, which are already covered by other levies, are excluded, as are certain fuels and chemicals.
And the new policy won’t apply to goods that are exempt from tariffs because they are compliant with the US-Mexico-Canada Agreement.
Speaking in Ottawa on Wednesday, Canadian Prime Minister Mark Carney said the exemption means Canada continues have the best deal among US trading partners, with mostly tariff-free trade between the two countries. The new US measure was not a surprise and Canada shares the objective to clamp down on products made with forced labour, he said.
Trump’s broad trade agenda suffered a sharp blow in February when the Supreme Court struck down levies he imposed using emergency powers.
As a stopgap measure, the president also implemented a 10% global levy under Section 122 of the trade law, though those import taxes expire in July. The Section 122 tariffs are themselves subject to an ongoing legal challenge.
Section 301 tariffs are seen as more legally sound and flexible than other powers Trump has eyed, but also more time-consuming.
The Hinrich Foundation’s Elms said the imposition of the newly announced tariffs is likely to coincide with the expiry of the Section 122 levies, once consultation and hearings wrap up.
Greer has said the goal was to complete a series of trade investigations to allow Trump to quickly enact new tariffs after the outgoing measures expire.
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