Reactions from trading partners have been swift following the Trump administration’s imposition of new double-digit tariffs on Thursday—the latest installment in a multi-season trade saga that has roiled relations across the globe.
Some nations and trade blocs were hopeful that a resolution on the issue could be reached, while others bemoaned the development and disputed the allegations that led to it. The 10 percent to 12.5 percent tariffs were the result of a Section 301 investigation into trading partners’ alleged failures to impose and implement effective bans on imports made with forced labor, led by the United States Trade Representative.
Prior to Thursday’s announcement, USTR Ambassador Jamieson Greer said that countries with trade deals with the U.S. would be spared from duties that exceed the agreed-upon tariff rate caps.
In a joint statement, the European Union said it was hopeful about talking through potential exemptions from the trade action, and “notes positively the fact that this outcome is in line with the U.S. tariff commitments agreed under the EU-U.S. Joint Statement,” or Turnberry Agreement.
Canada, embroiled in a deeper trade conflict with the U.S., was matter-of-fact in its assessment, with Canada’s minister in charge of U.S. trade Dominic LeBlanc saying, “We will continue engaging constructively with the United States on this matter, as well as other outstanding issues, over the coming weeks to the mutual benefit of our citizens.”
Australian Trade Minister Don Farrell was nonplussed by the USTR’s conclusion. “These tariffs are unjustified, inconsistent with our free trade agreement, and should be removed,” he said in a statement. “Australia’s measures to combat forced labor and modern slavery are among the strongest in the world, and we are recognized globally, including in the U.S., for our leadership.”
Brazil, which was hit with 25 percent duties from another Section 301 probe, now faces 37.5 percent tariffs in aggregate.
“Lacking a legal basis under domestic law to support its protectionist trade policy, the U.S. Trade Representative chose to manipulate an issue of great importance to human rights and workers’ rights movement,” the country’s government said in a statement.
Meanwhile, China reiterated its stance that tit-for-tat tariff escalation with the U.S. is undesirable and unproductive. “China’s position on China-U.S. economic and trade issues is consistent and clear. We oppose all forms of unilateral tariffs. Tariff wars and trade wars serve no one’s interests,” China Foreign Ministry Spokesperson Lin Jian said.
The new tariffs took effect Friday—the same day that the Trump administration’s global 10 percent duties, levied under Section 122 of the Trade Act of 1974, expired. That’s no coincidence, as the federal government has made its intentions clear about replacing the lapsing tariffs with new ones under a more durable trade statute.
At the same time, the results of a second Section 301 investigation into structural excess capacity that was launched almost concurrently with the forced labor probe, have not yet been announced. It’s largely expected that the probe into 16 economies will result in more duties still that will be stacked on top of the current round of Section 301 tariffs.
“Initially I was surprised by this silence, but you have to take into account just the enormous amount of work that’s on the desk of the U.S. Trade Representative,” Marcos Carias, economist for the North America region at Coface, told Sourcing Journal.
“They want to do this to an extent by the book this time. They got their fingers burned with the [International Emergency Economic Powers Act] experience,” he said, referring to the president’s “reciprocal” tariff regime that was struck down by the Supreme Court earlier this year. Those tariffs, which raked in around $166 billion for the U.S. Treasury, are now being refunded to importers.
Carias said the administration is eager to firm up its forward-looking tariff strategy around statutes that have the “proper judicial justification” and aren’t “legally vulnerable”—though they are most certainly going to be challenged by disgruntled importers in the future.
However, Section 301, unlike IEEPA, explicitly allows for the imposition of tariffs after a formal investigation by USTR. Trump employed the statute during his first term against China, deploying duties worth upwards of $350 billion that have basically remained in place through two administrations.
The administration is trying to avoid finding itself in an IEEPA conundrum again, Carias said—reliant on a dubious legal footing to achieve its tariff goals. “If they don’t do it properly, it might discredit their threats when they are negotiating with other countries,” he said.
However, there are drawbacks to the Section 301 investigations for an administration that likes to move fast and break things, to borrow a phrase coined by tech titan Mark Zuckerberg. Firstly, “[t]hey take a lot of manpower to do them this quickly,” Carias said, noting that it took nearly a year to complete the investigation into China that began in 2017.
“Here, they were racing against the clock” to impose duties before the Section 122 tariffs expired so there “wouldn’t be a gap” in duties. “Now that this one is implemented and out of the way, they’re probably going to accelerate their work on the Section 301 [investigation into] excess capacity. And my working assumption is that it’s going to come before the end of the year,” he said.
