Trump launches a new trade war

Tariffs on Brazil come into force today; tariffs on Canada were announced yesterday, but it will not be limited to Canada and Brazil. In fact, as many as 60 economies are set to be hit by a resurgence of the trade war that Trump is preparing to launch under the pretext of forced labour. At midnight on Friday, the temporary 10 per cent tariffs imposed by the White House on 20 February will expire, following the Supreme Court’s decision to overturn the other tariffs that Trump had imposed on 2 April 2025 – a date he had dubbed ‘Liberation Day’ – on the grounds that they had not been approved by Congress. Section 122 of the Trade Act of 1974 authorises the President to impose tariffs of up to 15 per cent or to set import quotas without congressional approval, in response to serious balance of payments crises or rapid currency depreciation. However, this is only permitted for a maximum of 150 days.

Having exhausted that ploy, and with no possibility of obtaining authorisation from Congress, Trump therefore turned to Section 301 of the same Act, which authorises the President to take all measures deemed appropriate – whether tariff-related or not – to address any kind of unfair action, policy or practice by a foreign government that harms US trade. The US Trade Representative, Jamieson Greer, predicted yesterday that Washington would adopt new tariff measures “soon”, without specifying any dates. Following public hearings held on 7 July, featuring testimony from governments, industries and business groups, the Office of the United States Trade Representative has in fact determined that 60 economies have neither banned nor effectively enforced sanctions against the import of goods produced using forced labour.

The tariffs would be divided into two tiers: 10 per cent for countries with partial bans, including Canada, the European Union, Mexico, the United Kingdom and Taiwan; and 12.5 per cent for economies without relevant legislation, a category that includes China, India and Japan, as well as around forty other countries. “The United States has laws prohibiting trade in goods produced using forced labour. Most other countries do not have such laws, and those that do do not actually enforce them,” said Greer. The European Union had already described tariffs imposed on the basis of this argument as “unjustified”.

Apart from the tariffs announced against Canada – which impose a 50 per cent duty on most products from our northern neighbour and are due to come into force on 19 August – a 25 per cent tariff on most Brazilian products has now come into force, also under Section 301, following a year-long investigation into unfair trade practices in sectors ranging from digital trade to access to the ethanol market. The American Chamber of Commerce for Brazil has warned that the measure affects over $11 billion worth of exports and places the country amongst those facing “the most restrictive conditions for access to the US market”. “Brazil’s unfair trade practices have prevented American workers and producers from accessing this important market,” Greer said in a statement. Among the concerns raised by the United States are measures deemed harmful to digital trade, “unfair competition” relating to the state-run electronic payment system PIX, and the preferential treatment Brazil grants to partners such as Mexico and India. The Trump administration has rejected the suggestion that the investigation was politically motivated and has warned that any retaliation could lead to further countermeasures.

Coffee, beef and aeronautical components are exempt. President Luiz Inácio Lula da Silva has rejected the measure, calling it unfounded, and has announced that he will challenge it before the World Trade Organisation, citing a cumulative trade surplus of $424.5 billion between Washington and Brazil over fifteen years, according to US government data. The investigation into forced labour could add a further 12.5 per cent, bringing the total to 37.5 per cent, in the run-up to the October presidential elections. Bolsonaro’s son Flávio, Lula’s main rival, had written to Trump asking him to suspend the investigations, to no avail. His opponents immediately dubbed him ‘TariFlávio’.