TRUMP’S TERRIBLE TARIFFS, AGAIN…
A few months ago, when the US Supreme Court ruled that Trump’s ‘Liberation’ tariffs were unconstitutional, I argued that Trump suffered from a malady psychiatrists called ‘fixed idea’ syndrome, according to which the patient holds on to ‘A firmly held, irrational idea or belief that is maintained despite evidence to the contrary; it may take the form of delusion and become an obsession.’
True to form, the Trump administration then imposed temporary import surcharges of up to 15% or quotas, up to 150 days to address “large and serious” balance of payments deficits or fundamental international payments issues. The new tariffs applied to a large number of products and countries. They led to delays in the ratification of the US- EU trade agreement concluded the previous summer and continued discussions with countries which had previous agreements setting tariffs at lower levels. Their constitutionality was dubious, but as they expired in a few months it was not seriously challenged in court.
In mid-July, Trump, not a strong supporter of environmental causes, imposed 25% tariffs on a large number of Brazil products allegedly for ‘illegal deforestation’ at a time that Brazil’s deforestation has hit an 11-year low, (https://www.reuters.com/sustainability/cop/brazils-amazon-deforestation-falls-11-12-months-through-july-2025-10-30) in large measure because of efforts by Brazil’s President Luiz Inacio Lula da Silva, against whom Trump seems to have a personal feud. A few days later, continuing a pattern of arbitrary and capricious trade policy, the US imposed large tariffs, up to 50% on many Canadian products allegedly for the latter’s discrimination against US exports of cars, alcohol and dairy.
On July 24, The US imposed tariffs on 60 countries alleging that they violated article 301b of the Trade Act of 1974 because they either engaged in forced labor or failed to impose and effectively enforce a prohibition on the importation of goods produced with forced labor and thereby restricted and burdened US Commerce. Tariffs are set or capped at 10% for 19 countries including the EU as well as Canada, the UK and a number of other countries which allegedly have regulations against forced labor but fail to enforce them; and set or capped at 12.5% for the remaining 41 countries, including China. Exemptions include rare earths, steel and aluminum (set at higher rates based on section 232 ‘security concerns’), as well as products covered under the US-Mexico-Canada Agreement.
Article 301 of the Trade Act of 1974 has been used repeatedly, and often justifiably, by the US to counter actions, such as subsidies by trading partners, which provide an unfair competitive advantage and thereby damage the interests of US exporters or US producers. The article typically involves a particular product and a particular country. Only once in its history the article has been considered against 11 countries in connection with digital services taxes in 2019 and at that time the US took no action against any one. It has never been used for a large number of countries and a huge number of products. Moreover, action under this article is subject to procedural requirements which include a prior investigation and consultation with the countries involved.
The administration, as has often happened on previous occasions, has been sloppy in following the procedural requirements of the law. No consultations appear to have occurred and the actual investigations called for by the legislation-(USTR Sec. 301, 6-2-26 Acts, Policies and Practices of Various Economies Related to the Failure to Impose and Effectively Enforce a Prohibition on the Importation of Goods with Forced Labor) were launched on March 12, 2026 —although typical of its sloppiness, the Report on page 9 says it is May 12. It was obviously impossible to actually investigate the policies of 60 countries on a myriad of products. Therefore, what the report does is to give examples of the products in which the problem has arisen: Here are the examples, all except one of which are agricultural exports, and readers can judge for themselves:
1. US exports of tobacco products to Poland were adversely affected by unfair labor practices of Malawi, one of poorest countries in the world, which however, is too small an exporter to be included in the list of countries against whom the US is imposing new tariffs;
2. US exports of rice to Spain amounting to about $360K per annum, or a minuscule 0.001% of Spain’s rice imports for the last decade, were adversely affected by the policies of Myanmar ( which the report calls .Burma!- and which is also not included in the list).
3. US exports of frozen beef to China affected by policies of Brazil;
4. US imports of solar cells increased from countries in South East Asia following the imposition of US controls on imports of these from China;
5. US exports of cotton to Indonesia adversely affected by practices of China.
On the basis of these examples and general evidence about the prevalence of forced labor practices globally, the US is imposing tariffs on almost all imports from 60 countries. I am not a legal expert but I suspect that there will be serious challenges in the courts on procedural grounds. “301 is a targeted, country-specific, and practice-specific remedial authority. It is not a freestanding authorization to tax substantially all imports from substantially all countries at pre-established rates” (https://libertyjusticecenter.org/newsroom/liberty-justice-center-files-first-lawsuit-challenging-trumps-massive-new-section-301-tariff). It is unlikely that courts would be in a position to examine for example, whether indeed EU policies regarding forced labor adversely affected US domestic producers in thousands of product categories of imports from the EU. But courts will have a say on whether the findings of the very narrow investigations about a few products, such as they are, can apply to a huge number of product categories for other countries. Another recently filed court action against the measures claims that the investigation “failed to establish valid finding for each affected country”.
The short term economic impact of these tariffs is well understood: they raise costs to US consumers, especially those with low incomes, estimated at 0.8%, on top of rising inflation due to increased costs of gasoline and other products caused by the Iran war. Moreover, there is little evidence that tariffs have a serious impact on increasing domestic manufacturing output or employment. Employment in US manufacturing has declined in absolute terms over the last decade and today is at levels below those before the pandemic. Manufacturing output as a share of US GDP has been declining for decades and now accounts for less than 10% of US GDP.
Still, the manufacturing sector attracts attention globally, with countries vying to secure a larger share of a constantly shrinking pie—via efforts to secure supply chains, and a dizzying variety of ‘industrial’ policies. Perhaps the continuing focus on industry is a residual of the romantic notion that countries develop through industrialization- forgetting that in the 21st century it is technology and services that drive growth and prosperity. But even in this narrow context, tariffs, especially as practiced by the Trump administration are a poor instrument: The continuing and arbitrary changes in levels and their weak legal justification introduce continued uncertainty which is lethal for investment. According to a recent survey by an accounting firm, half of the business leaders surveyed reported low confidence in carrying out their investment plans. And without new investment there is no way the manufacturing sector is going to flourish or even reduce its decline.
In my February blog, I had raised the hope that perhaps the US Congress will intervene and exert its authority in setting tariffs. Congress’ recent lack of action in this and other issues suggests that this is a forlorn hope. In the interim, judicial action may well reverse the latest misguided set of tariff policies. A new approach to international trade and sensible tariff policy must wait for a new Congress and a new administration.
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