President Donald Trump is slowly rolling out his new tax administration to replace the one struck down by the Supreme Court earlier this year.
So far, it is more restricted than the previous version – the direction of the actual economic situation of the country.
The Trump administration this week proposed new duties to more than 60 countries after a rapid trade review — in many cases proposing far lower tariffs than the illegal ones it imposed last year. The White House also announced that it will pay its higher tariffs on products made of steel, aluminum and copper in a bid to ease the burden on the agricultural and manufacturing industries, in particular.
It’s a sign of how Trump’s trade agenda is shaped by two different forces: The political imperative to lower the cost of everyday goods, and Trump’s desire to “reinvent” America 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 tax proposals in the coming weeks.
“This week’s announcements show a perfect balancing act,” said a business 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 US Trade Representative’s office did not respond to a request for comment.
Tuesday’s proposals from the USTR drew strong reactions from trading partners, but behind the scenes many agreed they were broadly expected and would not by themselves change the course of ongoing negotiations.
The White House has signaled for months that it intended to restructure the tariffs it imposed last year on countries around the world after the Supreme Court ruled in February that they were unconstitutional. In addition to immediately imposing a temporary 10 percent global tariff, the administration responded to the decision by launching trade investigations into every major trading partner — and many smaller ones, too.
US Trade Representative Jamieson Greer announced the findings of one of the investigations on Tuesday evening, concluding that all 60 partners surveyed are not doing enough to eradicate forced labor from their supply chains.
With that in mind, he proposed a tax rate of 12.5 percent for 44 countries. He also proposed a tax rate of 10 percent for countries that already have laws aimed at preventing products made with forced labor, such as the European Union, Canada and Mexico, as well as countries that have a trade agreement signed by the administration and the United Kingdom, which reached an early agreement with the White House.
Trump, by contrast, threatened to impose a 30 percent tariff on goods from the European Union last summer before reaching a deal to reduce the tariff to 15 percent, as did other key allies such as Japan and South Korea. India faced an 18 percent tariff under the president’s tax which is now illegal. And Brazil faced a 50 percent tariff, although the White House later removed most Brazilian goods.
But the White House is also looking to raise tariffs slightly from what it imposed last year on goods from countries including Australia, Argentina and New Zealand, which had faced tariffs of just 10 percent.
The administration’s latest proposal included many of the same product exemptions that the U.S. added in the last round of the previous round of tariffs, including for agricultural products that cannot be grown in the United States.
One former USTR official said that Greer’s proposed levels of forced labor tariffs were higher than they expected, given that they are the starting point for Trump’s new tariff plan, but “the exemptions are broad, too.”
“In the past we’ve seen the final numbers decrease or be delayed, so I’m looking at that as well,” said the person, who spoke on condition of anonymity because they were not authorized to speak publicly.
In addition to the forced labor investigation, Greer’s office is currently racing to complete a separate investigation into 16 trading partners, including the EU, China, and a number of emerging Southeast Asian nations, to see if they are overproducing in their manufacturing sectors to unfairly flood the US market.
Foreign governments, including the European Union, are still concerned that the United States could use the investigation to justify imposing additional duties on top of those it imposes on alleged violations of forced labor, and increase overall tariffs on their products.
That could jeopardize governance deals with Europe, Japan and South Korea and Britain, which all negotiated lower tariffs of between 10 and 15 percent last year, in exchange for promises of market access and foreign investment.
While Brussels and Beijing bothslammed the new tax proposalinpublic informationEU officials have said privately that the 10 percent rate is what they can live with. But they were also worried that the upcoming trade probe could raise more taxes.
The US proposal is “more or less” sustainable, said one official, who spoke on condition of anonymity to discuss negotiations with Washington. “We’re still waiting for more details on what this means.”
Other foreign leaders generally shared that cautious view.
“This is not surprising,” Canadian Prime Minister Mark Carney told reporters on Wednesday. “It’s something the United States has been planning for a few months.” He also touted Canada’s status as a member of the North American trade pact known as the US-Mexico-Canada Agreement, which has largely been removed from Trump’s latest set of mandates. “That puts us in a position where, again, we would still have the best trade agreement of any of America’s trading partners.”
The USTR still needs to hold a public hearing and solicit public input before finalizing the forced labor tariffs — Greer said Tuesday night at a hearing on the case that will be held on July 7. Officials from Mexico to Costa Rica to India stressed in statements they plan to continue cooperating with the Trump administration on the investigation, in hopes of negotiating further cuts.
The agency is also moving forward with investigations on individual countries. Late last month, it launched a trade investigation in Vietnam over its failure to protect intellectual property rights, which could lead to another set of tariffs for Hanoi. This week Greer proposed a 25 percent tariff on Brazilian goods after a separate investigation — a proposal that should go through a similar public hearing and comment process this summer.
The push for the effort is to maintain a trade barrier around certain US industries that is proving to be more legally permanent than Trump’s last round of duties. But even as it does so, the administration shows more interest in carving out certain kinds of important political goods.
Since last fall, the White House has been taking steps to strategically cut tariffs on certain products as consumer sentiment has weakened. In November, Trump removed more than 1,000 agricultural products that cannot be found in the United States from his tariffs – providing relief to the grocery store even as he maintained that the move was primarily a demonstration of new trade deals.
It suspended plans to impose new tariffs on wooden furniture at the end of the year, and has announced plans this season to hold talks with China.reduce tariffs on some “non-sensitive” types of goods.
The president has also revised the 50 percent tariffs on steel, aluminum and copper that had been extended last year to hit not only raw materials but thousands of products made of metals. Update in Aprilreduce responsibilitiesfor a number of everyday products, from beer cans to mattresses to motorcycles. The White House offered more exemptions to the tariffs on Monday to further ease the burden on certain sectors, particularly agriculture and manufacturing, which have borne the brunt of Trump’s trade war through high input costs and unstable foreign markets. The war in the Middle East and rising energy prices have added to the pain.
“The recent environment has affected and continues to affect domestic industries that use agricultural equipment, industrial equipment and machinery, and other related products,” read a White House announcement waiving some agricultural machinery tariffs.
A trade attorney close to the White House warned that the latest tariff elimination will create more confusion, however.
“Washington continues to tell manufacturers that (steel tariffs are) necessary to boost domestic production, then turn around and cut deals for large importers,” said the lawyer, who spoke on condition of anonymity to discuss the administration’s decision. “It’s Ashton Kutcher’s version of business policy; just when you think everyone’s playing by the same rules, you realize you’ve been hit by a rando in a John Deere hat.”
