The Trump administration, as expected, imposed duties on a list of 60 economies, including separate countries and the European Union, as it continues to pursue tariffs after the United States Supreme Court struck down levies imposed under the International Emergency Economic Powers Act (IEEPA) of 1977.
How the new tariff regime, authorized under Section 301 of the Trade Act of 1974, will affect businesses in the U.S. is not fully clear at this point.
Derek Miller, president and CEO, of the International Housewares Association said, “IHA continues to keep a close eye on tariff developments through our Washington office with the goal of informing the industry about all available paths to navigate the tariffs, to advocate for and amplify the concerns of its members, and to align with legislative outreach and other initiatives to mitigate the disruptive impact of the tariffs.”
Craig Brightup, of the International Housewares Association’s government affairs office in Washington, D.C., said IHA members should look at the new statute as it applies to specific imports on a case-by-case basis. Some of the tariffs are broad and affect countries in general, but they often have product-specific elements that reduce what the broad rate on the nation suggests, subject to previous trade arrangements, such as most-favored-nation status, and exemptions within the current tariff regime, Brightup noted. He said IHA members who source material or finished goods through importation need to determine if the tariff rates they are paying will change or remain the same.
“What it means is you have got to go back and take a look at what has taken place and do a compare and contrast,” Brightup said.
After the Supreme Court struck down the IEEPA duties, the Trump administration invoked Section 122 of the Trade Act of 1974 to impose temporary 10% global tariffs as a bridge to continue levies until it could bring Section 301 into play. The Section 122 tariffs, which expired July 24, have been subject to legal action and a determination of what happens to them is still not decided.
The new tariffs imposed under Section 301 would appear to be on firmer legal footing than was the case with the IEEPA duties, but they are likely to face court challenges on the grounds that the imposition is too broad and does not meet certain specific requirements laid out in Section 301. The broad scope of potential exemptions that the administration carved out for itself could also generate scrutiny, as could the interpretation of the statute, especially regarding how much authority to tax, with tariffs falling under U.S. congressional taxation power; Section 301 actually permits the executive branch.
In a White House announcement, the Trump administration said the tariffs were implemented after investigations conducted under Section 301 rules and relate to each economy’s failure to impose and effectively enforce a prohibition on the importation of goods produced with forced labor. After the investigation, according to the White House statement, the United States Trade Representative proposed tariffs of 10% on goods of economies that impose a forced-labor import prohibition but do not yet effectively enforce it, a group that includes Canada, Ecuador, the European Union, Indonesia, Mexico, and Pakistan.
The administration applied the 10% tariff to economies that have undertaken commitments in their respective agreements on reciprocal trade regarding forced-labor import prohibitions, including Argentina, Bangladesh, Cambodia, Ecuador, El Salvador, Guatemala, Indonesia, Malaysia and Taiwan; or have imposed a partial regime with the effect of preventing the importation of certain forced labor goods, in this case, the United Kingdom. For other economies that have failed to impose forced-labor import prohibitions, the administration imposed 12.5% tariffs.
The new tariff initiative includes potential for exemption on several grounds. It proposed exemptions for certain products and tariff-rate quotas for specific items produced by cited economies in part based on the needs of the U.S. or based on the extent to which imposing tariffs would contribute to the elimination of forced-labor acts or practices found to be actionable in the trade representative investigations. Exemptions can be specific to products on which the imposition of duties could lead to a lack of domestic supply and to products that could cause U.S. economy-wide disruptions if subject to the proposed additional tariffs.
Also, potentially exempt are products that cannot be grown or produced in sufficient quantities or at reasonable prices in the United States or obtained from other sources. Tariff exemptions might also be made regarding products that would, if cleared, encourage economies to implement or enact commitments regarding forced-labor import prohibitions, as well as on products where duties might not contribute substantially to the elimination of acts and practices found to be actionable in the investigations.
The administration pointed out that, as for goods from the European Union, Japan, Korea, Switzerland or Taiwan, section 301 tariffs would be net of most-favored nation duties, consistent with their respective agreements on reciprocal trade or similar arrangements. As such, whatever tariff they might be paying would be incorporated into the new Section 301 tax rate.
For economies the administration has maintained have imposed forced-labor import prohibitions — including Cambodia, Guatemala, Honduras, India, Sri Lanka, and Trinidad and Tobago — or undertaken commitments regarding forced-labor import prohibitions in an agreement on reciprocal trade, in this case, Jordan, the tariff will be 10% to further encourage them to effectively enforce their commitments, according to the White House.
In some cases, tariffs will be stacked, with new duties added to existing ones, but the impositions are not necessarily country-specific. In the case of Brazil, for which a 25% tariff was recently imposed, some products will be subject to a 37.5% levy, others will be levied at lesser rates and some, such as aluminum and steel, will retain 50% rates imposed under Section 232 of the 1962 Trade Expansion Act, which deals with national security issues.
