US proposes levies of at least 10% as Trump rebuilds tariff wall

WASHINGTON – The US is proposing tariffs of at least 10 per cent on imports from most major trading partners following an investigation into goods allegedly produced by forced labour, as President Donald Trump seeks to rebuild the sweeping tariff wall struck down by the US Supreme Court.

The 10 per cent rate would apply to imports from Canada, Mexico, the European Union, Taiwan and Britain, among other places, according to a statement from the Office of the US Trade Representative.

Products from other major economies, including China, India, Japan, South Korea, Brazil and Switzerland, would be subject to a 12.5 per cent levy.

The trade office said it was imposing the lower rate on goods from economies that impose prohibitions on forced labour import prohibitions or have committed to doing so, while those “that have failed to impose and effectively enforce” them received a higher rate. 

The move is a major step in Trump’s push to reinstate the country-by-country tariffs he imposed during the first year of his second term 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.

“It’s very impactful because Section 301 is an extremely powerful tool, and it’s unlikely to be overturned,” said Deborah Elms, head of trade policy at the Hinrich Foundation in Singapore.

“In the hands of an administration determined to cause mischief, you’ve opened a door now for a whole lot of new tariff and non-tariff adjustments.”

Equities remained higher after the news.

MSCI’s All Country World Index rose 0.1 per cent to a record, with gauges in Asia and the US setting all-time highs. 

More broadly, 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.

Those higher energy prices have 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 will not 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.

“The failure of our most important trading partners to address the importation of goods made with forced labour is unacceptable. 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.”

The move will test the tolerance of the largest US economic partners, who have largely refrained from retaliating against Trump’s tariffs, opting instead to negotiate deals to lower import taxes and ensure market access.

Japan’s trade and foreign ministries, China’s foreign ministry and the Australian government did not immediately respond to requests for comment on the proposed tariffs. 

The forced-labour probes were just one prong of the administration’s effort to revive Trump’s tariffs.

There is a separate raft of 301 investigations into US trading partners’ excess manufacturing capacity. 

There are 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. 

Trump’s broad trade agenda suffered a sharp blow in February when the Supreme Court struck down levies he imposed using emergency powers.

The 301 probe into forced labour practices initially targeted around 60 economies. 

Section 301 tariffs are seen as more legally sound and flexible than other powers Trump has eyed, but also more time-consuming.

As a stopgap measure, the president also implemented a 10 per cent 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.

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.

The moves pose questions about the stability of a truce with China following a summit between Trump and his Chinese counterpart Xi Jinping in May that 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 dialogue between Beijing and Washington,” said Zhu Feng, 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’.” BLOOMBERG