The Office of the United States Trade Representative issued a notice on the 23rd, announcing that pursuant to Section 301 of the Trade Act of 1974, it will impose tariffs of 10% to 12.5% on 60 countries and regions under the pretext of “forced labor,” to replace the global import tariffs expiring on the 24th. The new tariffs are set to take effect on Eastern Time, the 24th.
According to the scheme announced by the US, these tariffs are set at multiple differentiated rates, with different economies subject to implementation standards of 10% to 12.5%.
The scheme states that a 10% tariff applies to economies that have been investigated and meet any of the following conditions: having implemented a system prohibiting the import of forced labor products; having committed to establishing and enforcing such a ban through a Reciprocal Trade Agreement; or having partially implemented relevant systems that can effectively prevent certain forced labor products from being imported.
The relevant economies include Malaysia, Argentina, Bangladesh, Cambodia, Canada, Ecuador, El Salvador, Guatemala, Honduras, India, Indonesia, Jordan, Mexico, Pakistan, Sri Lanka, Trinidad and Tobago, and the United Kingdom.
Certain products (not exempt) from the EU, Taiwan, Japan, South Korea, and Switzerland are subject to a 10% or 12.5% tariff, but after deducting the net rate corresponding to their Most-Favored Nation (MFN) rates. The specific product categories and applicable rules are subject to the Federal Register announcement.
Apart from the above, all other investigated economies are uniformly subject to a 12.5% tariff rate.
The US side also sets up a tariff exemption channel. Goods that meet the criteria of possibly causing shortages of raw materials in the US, possibly causing a broad economic impact on the US, or cannot be sufficiently produced, grown, or sourced at reasonable prices in the US or from other sources, can apply for exemption according to procedure.
In addition, certain products from Malaysia, Argentina, Bangladesh, Cambodia, Ecuador, El Salvador, the EU, Guatemala, Indonesia, Jordan, Switzerland, Taiwan, or the UK can apply for tariff exemptions, to incentivize the respective economies to fulfill their commitments to banning imports of forced labor products, or to formulate and effectively implement laws or measures prohibiting the import of forced labor products.
On February 20, the US Supreme Court issued a ruling determining that the International Emergency Economic Powers Act did not authorize the president to impose large-scale tariffs. On the same day, President Trump announced, under Section 122 of the Trade Act of 1974, a “10% global tariff on all countries” for 150 days, to replace the tariffs deemed illegal by the Supreme Court. This tariff will expire on July 24.
In March this year, the Office of the United States Trade Representative initiated a “301 investigation” against 60 major trading partners on the grounds of “failing to establish and effectively enforce an import ban on forced labor,” and in June recommended imposing an additional 10% to 12.5% tariff on exports from these economies to the US.