Forced labour concerns a 'convenient' rationale for rebuilding Trump's tariff wall: Analysts
The United States said on Thursday (Jul 23) it would impose tariffs of between 10 per cent and 12.5 per cent on imports from 60 trading partners over forced labour concerns, replacing a temporary 10 per cent global duty that expired on Friday.
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The Trump administration has rebuilt its tariff wall to better withstand future legal challenges, said analysts, with one expert calling the forced labour rationale for the new levies "a convenient excuse" to restore the tariffs struck down by the US Supreme Court earlier this year.
The United States said on Thursday (Jul 23) it would impose tariffs of between 10 per cent and 12.5 per cent on imports from 60 trading partners over forced labour concerns, replacing a temporary 10 per cent global duty that expired on Friday.
The new levies, which affect major economies including China, India and the European Union, are imposed under Section 301 of the Trade Act – a legal authority that allows Washington to maintain tariffs for a much longer period than the expiring measure.
NEW LEGAL STRATEGY
The move follows a Supreme Court ruling in February that struck down a host of tariffs imposed by President Donald Trump last year under emergency powers aimed at reducing the US trade deficit.
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Following that legal setback, Trump turned to Section 122 of the Trade Act to impose a temporary 10 per cent tariff on imports. But that authority only allows the duties to remain in force for 150 days, with the measure expiring on Friday.
“I don't think this is about forced labour at all. It was just a convenient excuse to rebuild the tariff wall that got overturned by the Supreme Court in February,” said trade and economic policy expert Deborah Elms.
She said the new Section 301 tariffs are likely to prove far more durable.
“So it's not actually about stopping forced labour or trade in forced labour, despite what the United States claims,” said Elms, head of trade policy at philanthropic organisation Hinrich Foundation.
“Basically, (they) have replaced one temporary statute now for one that is going to be much longer lasting and much more legally durable.”
The latest measures follow a months-long US investigation into forced labour.
Susan Stone of Adelaide University said that while forced labour has long been on the US trade agenda, there are other ways to address the issue. But “doing it through tariffs seems quite convenient with other parts of the Trump agenda”.
Stone said the tariffs would continue to create uncertainty.
“It continues to cause businesses to constantly have to reevaluate their contracts and where they're sourcing their materials,” she told CNA’s Asia Now.
“At the end of the day, they're just facing a continuation of a desire by the administration to impose some level of tariffs on a broad range of goods coming into the United States.”
HIGHER TARIFF ERA
China is among those facing the higher 12.5 per cent tariff rate and has criticised the latest US move.
“We oppose all forms of unilateral tariff measures,” Chinese foreign ministry spokesperson Lin Jian told a news briefing on Friday.
"Tariff wars and trade wars are not in the interests of any party," he warned.
On whether the new tariffs would undo recent progress in US-China ties, Elms believes Beijing likely has retaliatory measures ready but is weighing whether to respond now or wait, particularly with another Section 301 investigation into alleged excess manufacturing capacity that could pave the way for more US tariffs.
“China will be in the crosshairs for that one as well, and so I think they will have to decide in Beijing whether they want to retaliate now in whole or in part, or wait until they see further escalation measures from the United States,” she told CNA’s Asia Now.
“So it's a bit of a waiting game … whether or not we would expect retaliatory actions.”
The US is laying the groundwork for possible additional Section 301 tariffs through an investigation into allegations that 16 major trading partners maintain excess manufacturing capacity.
“We don't know when those will land. It could be soon, and that will drive the tariff rates presumably higher still,” said Elms, adding that these partners like Singapore could eventually face higher tariffs than before.
“The question is how high will those new tariffs be?”
She stressed, however, that all countries “are in worse shape” than before the start of Trump’s second term, when the average effective US tariff rate was about 2.4 per cent.
“We are now in a much higher tariff world with … more tariff and other trade tools being threatened by the United States against many of its largest and most important trading partners.”
LIMITED GLOBAL PUSHBACK
Most countries are likely to accept the new tariffs rather than retaliate, analysts said, with the bigger challenges expected to come through legal battles in US courts and potentially Congress after November's midterm elections.
“We do know that the majority of these tariffs are paid by domestic consumers,” said Stone.
“So any country that retaliates against the US by putting tariffs on US exports to their countries is really harming their own domestic businesses and their own domestic consumers.”
She added that many countries had come to recognise the economic costs of retaliatory tariffs, which explains why earlier US trade measures did not trigger broader retaliation.
“I suspect large parts of the world will just shrug and move on and largely accept the tariffs,” Peter Draper, executive director of the University of Adelaide’s Institute of International Trade, told CNA’s Asia First.
“We also know that the broader geopolitical environment is tenuous. It's deteriorating.”
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