News in Trade Policy
U.S. imposes new Section 301 tariffs over forced labor with carveouts for trade deals
USTR's investigation under Section 301 found that the 60 economies subject to the investigation failed to impose and effectively enforce a prohibition on the importation of goods produced with forced labor. Countries that (i) impose a forced labor import prohibition; (ii) have committed to impose and enforce such a prohibition through an Agreement on Reciprocal Trade; or (iii) have imposed a partial regime with the effect of preventing the importation of certain forced labor goods will face a 10% tariff. These economies include: Argentina, Bangladesh, Cambodia, Canada, Ecuador, El Salvador, Guatemala, Honduras, India, Indonesia, Jordan, Malaysia, Mexico, Pakistan, Sri Lanka, the United Kingdom, and Trinidad and Tobago.
For EU and Taiwanese products with MFN tariff rates below 10 percent, Section 301 duties will be added to bring the combined tariff rate to 10 percent. Where the existing MFN tariff is 10 percent or higher, no additional Section 301 duty will apply. For products from Japan, South Korea and Switzerland, the same approach applies up to a combined tariff rate of 12.5 percent. According to a presidential memorandum, this cap of duties remains consistent with the terms of the Agreements on Reciprocal Trade negotiated with trading partners. Imports from the other economies covered by the investigation will generally be subject to a 12.5 percent tariff.
The tariff measure does not apply to articles subject to Section 232 tariffs and it provides for broad product exclusions (Annex I & II), including for (1) raw materials that could become scarce in the U.S. market, (2) goods whose tariffs could trigger wider economic disruptions, (3) products that cannot be produced domestically or sourced elsewhere in sufficient quantities, (4) goods for which tariffs are unlikely to change the practices identified in the Section 301 investigations and (5) certain products of Argentina, Bangladesh, Cambodia, Ecuador, El Salvador, the European Union, Guatemala, Indonesia, Jordan, Malaysia, Switzerland, Taiwan, or the United Kingdom "that would encourage these economies to fulfill commitments regarding forced labor import prohibitions or to encourage these economies to enact and effectively enforce a forced labor import prohibition". Additionally, textile tariff-rate quotas for imports of cotton and textile from Bangladesh, Cambodia, Indonesia and Malaysia will be stablished.
In an effort to minimize the impact of legal challenges to the measures, USTR included language stating that if a court strikes down any of the new Section 301 tariffs or specific aspects of the measures, USTR intends for only the affected provisions to be invalidated, while the remaining tariffs and provisions stay in effect.
The tariffs take effect on July 24, 2026, the same day that the 10% global tariffs imposed under Section 122 expire.
This update is based on information provided by RGIT (Representative of German Industry and Trade).
