U.S. Escalates Trade War: New Tariffs Proposed on 60 Nations Over Forced Labor Practices

In a significant move that could reshape global supply chains, the Office of the U.S. Trade Representative (USTR) has unveiled a proposal for additional tariffs, hitting imports from 60 economies with duties of up to 12.5%. The sweeping action, taken under Section 301 of the Trade Act of 1974, targets nations failing to ban goods produced with forced labor, including major partners like China, the European Union, and Japan.

Key Developments:

• The U.S. proposes tariffs of up to 12.5% on imports from 60 economies for their failure to prohibit forced labor goods.
• Economies with partial forced labor bans face a 10% duty; all others face 12.5%.
• This initiative revives President Trump's efforts to reinstate country-specific tariffs, many of which were previously challenged.
• Washington is also seeking public input on a new U.S.-China Board of Trade, which could pave the way for mutual tariff reductions.

The USTR's determination asserts that all 60 countries have either failed to implement or effectively enforce prohibitions on forced labor-related imports, thereby creating an "unlevel playing field" for American workers. Under the proposed tiered system, economies with a full or partial ban on forced labor trade will incur a 10% duty, while all other nations will face a 12.5% tariff. Additionally, a separate textile mechanism is proposed to allow a specific volume of apparel and textile imports from some economies to enter the U.S. at reduced rates.

"The failure of our most important trading partners to address the importation of goods made with forced labor is unacceptable. This creates a dynamic where American workers are forced to compete globally on an unlevel playing field," stated U.S. Trade Representative Jamieson Greer. "We will no longer tolerate this disparity."

This proposal follows a U.S. Supreme Court decision earlier this year that struck down most of President Donald Trump's "Liberation Day" tariffs. That ruling had prompted his administration to impose 10% global baseline duties under Section 122, which are slated to expire in July. Section 301, conversely, empowers the president to impose levies to counteract unfair foreign trade practices detrimental to U.S. commerce.

Trade Talks Ahead

Despite the Supreme Court setback, the president's trade agenda remains robust. Nick Marro, principal at Economist Intelligence Unit, anticipates further investigations and tariff announcements from the Trump administration as it gears up for renewed rounds of trade talks. The impact of these proposed tariffs, however, may be mitigated by significant exemptions on certain products, including electronics and artificial intelligence-related goods.

Public comments on the proposal are due by July 6, with public hearings scheduled for July 7.

watch now

VIDEO7:2207:22

U.S. Trade Rep. Greer: We're investigating specific unfair trade practices by different countries

Squawk Box

While the tariff rates under Section 301 might see further adjustments, any significant changes are expected to profoundly reshape global supply chains by altering economic incentives for businesses, according to Deborah Elms, head of trade policy at the Hinrich Foundation.

Concurrently, the U.S. government has initiated a public comment period for a new U.S.-China Board of Trade. This board, agreed upon during a recent bilateral summit, aims to foster mutual tariff reductions. The government is also soliciting opinions on non-sensitive sectors that could benefit from tariff modifications from both sides. Nick Marro suggests China may temporarily refrain from direct retaliation, particularly regarding explicit trade restrictions, but Beijing's patience could wane if additional U.S. import tariffs are implemented.

— CNBC's Evelyn Cheng contributed to the report.