President Donald Trump is slowly unveiling his new tariff regime to replace the one knocked down by the Supreme Court earlier this year.
So far, it’s more restrained than the previous version — a nod to the country’s current economic realities.
The Trump administration this week proposed new duties on more than 60 countries after hurried trade investigations — in many cases suggesting tariffs substantially lower than the illegal ones it imposed last year. The White House also announced it is further paring back its high tariffs on goods made with steel, aluminum and copper in a bid to ease the burden on the agriculture and manufacturing industries, in particular.
It’s a sign of how Trump’s trade agenda is being shaped by two divergent forces: A political imperative to lower the cost of everyday goods, and Trump’s desire to “reindustrialize” the U.S. by erecting a high tariff wall to protect domestic manufacturing. That balance will continue to be tested as the administration looks to roll out several more rounds of tariff proposals in the coming weeks.
“This week’s proclamations illustrate the balancing act perfectly,” said a trade lawyer close to the administration. “Washington still wants tariffs, but it also doesn’t want farmers, contractors and manufacturers facing sticker shock on combines, bulldozers and other capital equipment. That’s the tension the administration is trying to manage.”
The Office of the U.S. Trade Representative did not respond to a request for comment.
Tuesday’s recommendations from USTR drew sharp responses from trading partners, but behind the scenes many conceded they were generally expected and would not, on their own, change the dynamics of ongoing negotiations.
The White House has been signaling for months that it intended to reconstruct tariffs it levied last year on countries around the world after the Supreme Court ruled in February that they were illegal. In addition to imposing a temporary 10 percent global tariff immediately, the administration responded to that ruling by launching two trade investigations into every major trading partner — and many minor ones, as well.
U.S. Trade Representative Jamieson Greer announced the findings of one of those investigations late Tuesday, concluding that all 60 partners investigated are not doing enough to root out forced labor from their supply chains.
Based on that, he recommended a 12.5 percent tariff rate on 44 countries. He also suggested a 10 percent tariff rate on countries that already have laws aimed at blocking goods made with forced labor, like the European Union, Canada and Mexico, as well as countries that have a signed trade agreement with the administration and the United Kingdom, which struck an early framework deal with the White House.
Trump, in comparison, threatened a 30 percent tariff on goods from the European Union last summer before reaching a deal to lower the duties to 15 percent, as did other major partners like Japan and South Korea. India faced tariffs of 18 percent under the president’s now-illegal tariffs. And Brazil was hit with a 50 percent duty, although the White House later exempted a large range of Brazilian goods.
But the White House is also looking to raise tariffs slightly from what he set last year on goods from countries including Australia, Argentina and New Zealand, which had only faced a 10 percent import tax.
The administration’s latest tariff proposal included many of the same exemptions for goods that the U.S. added last fall to the previous round of tariffs, including for agricultural goods that can’t be grown in the U.S.
One former USTR official said that Greer’s recommended rates for the forced labor tariff were actually higher than they had expected, given that they are just a starting point for Trump’s new tariff plan, but “the exemptions are broader, too.”
“In past cases we’ve seen the final number go down or be delayed, so I’m watching for that, too,” said the person, who was granted anonymity because they were not authorized to speak publicly.
In addition to the forced labor probe, Greer’s office is currently racing to complete a separate investigation into 16 trading partners, including the EU, China, and a number of rising Southeast Asian economies, looking into whether they are overproducing in their manufacturing sectors to unfairly flood the U.S. market.
Foreign governments, including the EU, remain concerned the U.S. could use that probe to justify stacking another duty on top of the ones it’s pitching for alleged forced labor violations, driving up the total tariffs their goods face.
That could jeopardize the administration’s deals with Europe, Japan and South Korea and the UK, which all negotiated lower tariffs of between 10 and 15 percent last year, in exchange for pledges of market access and foreign investment.
While Brussels and Beijing both slammed the new tariff proposal in public statements, EU officials said privately that the 10 percent rate was one they could live with. But they also worried the next trade investigation could raise duties far higher.
The U.S. proposal is “more or less” sustainable, said one official, granted anonymity to speak candidly about negotiations with Washington. “We are still waiting on more details of what this means.”
Other foreign leaders generally shared that cautious sentiment.
“This is not a surprise,” Canadian Prime Minister Mark Carney told reporters Wednesday. “It’s something that the U.S. has been planning for a few months.” He also touted Canada’s status as a member of the North American trade deal known as the U.S.-Mexico-Canada Agreement, which are largely exempted from Trump’s most recent batch of duties. “That puts us in a position where, again, we would still have the best trade deal of any of the U.S. trade counterparts.”
USTR still needs to hold a public hearing and solicit public comment before finalizing the forced labor tariffs — Greer said Tuesday night the hearing will take place on July 7. Officials from Mexico to Costa Rica to India emphasized in statements they plan to continue to engage with the Trump administration on the investigation, with the hopes of negotiating further reductions.
The agency is also moving forward in parallel on investigations on individual countries. Late last month, it initiated a trade probe into Vietnam over its failure to protect intellectual property rights, which could lead to another set of tariffs on Hanoi. This week Greer suggested imposing a 25 percent tariff on Brazilian goods after a separate investigation — a proposal that has to go through the same process of public hearings and comment this summer.
The thrust of the effort is to maintain a trade barrier around certain U.S. industries that proves more legally durable than Trump’s last round of duties. But even as it does so, the administration is showing more willingness to carve out certain types of politically-salient goods
Since last fall, the White House has been taking steps to strategically reduce tariffs on certain goods as consumer sentiment has soured. In November, Trump exempted more than 1,000 agricultural products that can’t be sourced in the U.S. from its tariffs — providing relief at the grocery store even as it maintained that the move was primarily a reflection of new trade deals.
It paused plans to impose new tariffs on wooden furniture at the end of the year, and has announced plans this spring to negotiate with China to reduce tariffs on some “non-sensitive” categories of goods.
The president has also adjusted the 50 percent steel, aluminum and copper tariffs that it had expanded last year to hit not just the raw materials but thousands of products made with the metals. An update in April reduced the duties on a number of everyday goods, from beer cans to cribs to motorcycles. The White House made more exemptions to those tariffs on Monday to further ease the burden on certain sectors, particularly agriculture and manufacturing, who have borne the brunt of Trump’s trade war through high input costs and unstable export markets. The Middle East War and surging energy prices have only intensified the pain.
“Recent circumstances have affected and are affecting domestic industries that use agricultural equipment, industrial equipment and machinery, and other related products,” read the White House proclamation peeling back some of the tariffs on agricultural machinery.
The trade lawyer close to the White House warned that the latest tariff carve outs will just create more confusion, however.
“Washington keeps telling manufacturers that [the metal tariffs are] necessary to strengthen domestic production, then turns around and cuts deals for the largest importers,” said the lawyer, granted anonymity to speak candidly about the administration’s decision. “It’s the Ashton Kutcher version of trade policy; just when you think everyone is playing by the same rules, you discover you’ve been punk’d by a rando in a John Deere hat.”