The drums of trade war are rumbling again.
Donald Trump is preparing a new wave of tariffs on up to 60 countries. The key date is next Friday, when the currently effective 10% global customs duties imposed by the US president expire, after the Supreme Court annulled his previous “reciprocal” tariff barriers last February, considering that the magnate exceeded his powers.
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That provisional measure, about to expire, finds its legal basis in Section 122 of the Trade Act of 1974, which allows the White House occupant to impose trade restrictions in case of serious balance of payments problems or dollar depreciation for 150 days, which end later this week. Beyond this period, Congress would have to approve an extension, something very unlikely under current political conditions.
Current customs duties expire this Friday and the White House seeks alternatives
Hence, as several financial media reported yesterday, Donald Trump plans to find a new legal basis to move forward with his protectionist policy. This time he intends to invoke another section of the aforementioned Trade Act of 1974: specifically, Section 301. What does the rule say? It allows the president to retaliate against countries that violate international trade agreements or act in an unjustified, discriminatory, or unreasonable manner against US trade. And what would these alleged violations be?
The law stipulates that a formal investigation must first be opened by the Office of the United States Trade Representative (USTR), which has been underway for some time. The US administration accuses these countries of promoting or allowing forced labor and, therefore, wants to apply a levy on goods linked to these abusive labor practices.
A maneuver that includes several Asian countries where —in the past— there were proven cases (in China, Thailand, or Malaysia) of trafficking, labor transfer, or debt bondage. But it also affects 14 EU countries, where labor protection regulations are very strict. Nevertheless, the US accuses the EU of laxity or inaction and argues that Brussels does not effectively or strictly prohibit the import of goods made with forced labor within its own borders. Europeans would be subject to a 10% surcharge and the rest, about 12.5%.
Administration unveils 50% tariff on most Canadian products
Unlike Section 122 (the legal basis for tariffs in force since last February), these new tariffs that Donald Trump has pulled out of his hat are potentially more lethal: they have longer application periods (four years renewable indefinitely) and no maximum cap. Trade Representative Jamieson Greer said yesterday that “we expect news soon.”
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States whose exports will be affected by this measure do not have many options to react. They cannot appeal Section 301 measures directly to US domestic courts or demand the annulment of tariffs in the US judicial system. At most, they have the right to submit allegations in the USTR investigation. They could appeal to the World Trade Organization (WTO), but the US has long maintained that the rulings of this body have no effect on its legal system; furthermore, the WTO’s appellate body is blocked because the Americans oppose its renewal. Therefore, only two alternatives remain: either an appeal by a US importing company —for example, considering that its businesses are losing competitiveness or being harmed by the protectionist measure— or responding with trade retaliation measures, which would lead to a large-scale conflict.
By the way: the EU has just approved, after a long process, the trade agreement with the US, which foresees a tariff ceiling of 15%. It remains to be seen how the pact would stand if this new tariff for not effectively fighting forced labor came into force: whether this 10% percentage would be added to the pre-existing 15% or not.
The plan foresees a 10% surcharge for the EU and 12.5% for another bloc of countries, such as Asian countries and China
The escalation of US trade policy comes just weeks before the midterm elections after the summer. Trump announced just yesterday a 50% tariff on most products imported from Canada worth almost $20 billion. These new levies will come into effect within thirty days and exclude, among others, energy, potash, critical minerals, and fish.
Once again, Trump resorts to another legal ploy: Section 338 of the Tariff Act of 1930, a nearly 100-year-old Great Depression-era rule that had fallen into disuse. Washington alleges persistent discrimination by Canada against US products, highlighting quotas on the dairy sector and restrictions and tax burdens on US alcoholic beverages.
Letter from US lawmakers
Republicans call for retaliation against EU to save tech companies
A group of 25 US lawmakers has written to President Donald Trump urging him to act against European tech rules, including launching trade investigations, arguing that the EU’s digital policies unfairly target large US tech companies.
In a letter seen by Reuters, the lawmakers focused on the European Union’s Digital Markets Act, aimed at limiting the power of Amazon, Apple, Booking, ByteDance —owner of TikTok—, Google, Meta Platforms, and Microsoft. “We write to draw your attention to the multiple ways in which the EU continues to resort to anticompetitive acts, policies, and practices as a tool of economic extraction and regulatory coercion against US companies, and to encourage your Administration to take decisive action before the EU further entrenches this anti-American regime,” the lawmakers wrote in the letter. The European Commission states that its rules are not aimed at any country and seek to ensure fair competition conditions.
These lawmakers are all Republicans, and seven of them are members of the House trade subcommittee.
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