The United States is proposing new tariffs of at least 10 percent on imports from 60 trading partners, marking President Donald Trump's most significant move to rebuild his protectionist trade barriers after earlier levies were struck down by the U.S. Supreme Court.
New Tariff Structure
Under the proposed structure, a 10 percent tariff rate would apply to imports from Canada, Mexico, the European Union, Taiwan, and the United Kingdom, among others. This follows an investigation into how trade partners handle goods allegedly produced by forced labor, according to a statement from the Office of the U.S. Trade Representative (USTR).
Products from other major economies, including China, India, Japan, South Korea, Brazil, and Switzerland, would face a higher 12.5 percent levy. The USTR stated that the lower rate applies to economies that impose prohibitions on forced labor imports or have committed to doing so, while those that have failed to impose and effectively enforce such prohibitions received the higher rate.
Legal Basis and Implications
This move is a major step in Trump's push to reinstate tariffs imposed during his first term, which were deemed unconstitutional by the Supreme Court. The recommended duties result from probes launched under Section 301 of the Trade Act of 1974, a separate legal authority. A separate raft of 301 investigations includes a review of trading partners' excess manufacturing capacity, and trade analysts speculate whether future duties from that probe could be stacked on top of those proposed under the forced labor investigation.
“Trade partners will be understandably upset by this determination,” said Deborah Elms, head of trade policy at the Hinrich Foundation in Singapore. “You’ve opened a door now for a whole lot of new tariff and non-tariff adjustments.”
Market and Economic Context
Equities remained higher after the news, with MSCI's All Country World Index rising 0.1 percent to a record. The levies arrive at a pivotal time for the global economy, with financial markets already on edge over the Iran war and a resultant spike in oil and gas prices. Higher energy prices have fueled new fears about inflation, and in the U.S., exacerbated affordability concerns among voters that threaten Trump's Republican Party in November's midterm elections.
Implementation Timeline
The levies will not go into effect immediately. They are subject to a public comment and review period before implementation, which could result in changes. Written comments are due by July 6, and a Section 301 panel is expected to convene public hearings beginning on July 7, according to the notice. The USTR investigated whether the economies involved had failed to impose a forced labor import prohibition or effectively enforce such a prohibition, finding that none of the 60 economies effectively enforce a forced labor import prohibition.
