Trump and tariffs, chapter three. This time, the excuse is forced labour

The Trump administration is seeking to make permanent – albeit on a different legal basis – the level of tariffs that the Supreme Court had struck down in February, ruling that customs duties imposed under emergency powers were unlawful. In fact, at 00:01 Washington time yesterday, new tariffs came into force under Section 301, at 10 per cent or 12.5 per cent against 60 countries, at precisely the same moment that the other 10 per cent global tariffs expired; these had been introduced in February for 150 days under Section 122 of the Trade Act, which the government had fallen back on following the Supreme Court’s February ruling, but which was in turn struck down in May by the Court of International Trade, without, however, halting their application. “They were looking for a legal justification to impose the tariffs. The aim is to tackle the trade deficit and boost manufacturing, not forced labour,” Caroline Freund, former Director of Trade at the World Bank, told the BBC yesterday.

And it is precisely forced labour that is the reason behind these tariffs. Section 301 of the Trade Act of 1974 allows the Office of the United States Trade Representative (USTR), under the direction of the President, to impose tariffs to counter practices by importing countries deemed ‘unreasonable’ or harmful to US trade. The USTR investigation, launched in March, concluded that 60 economies – including the European Union, which approved a similar ban in 2024 but which will only come into force in December 2027 – have either failed to impose or are failing to enforce a ban on forced labour in the production of goods. The list also includes, for the first time since the start of Trump’s trade offensive, Russia, which is now subject to the maximum rate of 12.5 per cent but had previously been excluded because it was already subject to other sanctions. China, on the other hand, will indeed pay 12.5 per cent, but this will be in addition to both the standard tariff and the 2018–19 duties that have never been revoked.

For the EU, however, the 10 per cent duty is ‘all-inclusive’: if the standard tariff was below 10 per cent, the new duty makes up the difference; if it was already at or above 10 per cent, nothing is added and the product continues to be subject to the standard tariff. This ensures compliance with the 15 per cent ceiling set out in the EU–US agreement, reached at Turnberry in Scotland in July 2025. “The outcome is in line with the commitments made by the United States,” commented the European Commission. Yet just over a week ago, the Commission had submitted to Washington a list of products it was seeking to exempt, amounting to around €150 billion worth of exports. However, only two were granted exemptions: cork and diamonds. Meanwhile, for products such as olive oil – which the United States produces almost none of – the request was rejected.

But there is one other thing these tariffs do not exempt: uncertainty. The legal basis for this wave of tariffs is more solid than that of the first two, but not entirely immune to American checks and balances. Section 301, in fact, vests the power in the Office of the US Trade Representative, which is a government agency, and not in the President of the United States. However, as the Congressional Research Service pointed out on 21 July, the courts review the decisions of government agencies using stricter criteria than those applied to presidential acts. On the other hand, the decision is set to lapse automatically after four years, unless renewed. During this period, as there is no upper limit, the tariff rate may rise even without a new investigation.

If, once again, the legal basis were to be declared unlawful, the costs arising from the damage caused first to importers and subsequently to the federal budget could be devastating. Although – as calculated by Gita Gopinath (former chief economist of the IMF) and Brent Neiman (professor at Chicago Booth) in a Cato Institute brief – by the end of 2025 the average tariff actually levied stood at 12 per cent, less than half the 26 per cent envisaged on paper, US importers paid approximately $166 billion in duties that were subsequently ruled unlawful. According to the Cato Institute’s calculations based on government data, as at 29 June, around $71 billion had been refunded. Less than half.