Trump’s new trade tariff thrusts

There were many who felt, and some seemed convinced, that Donald Trump would back down after the Supreme Court culled his so-called ‘emergency’ trade powers. But even then, there were a few sceptics, even as his loyalists maintained that the US president would never give up on trade tariffs. The latter proved right. Immediately after the Court order, the US imposed a 10 per cent tariff under a clause in the trade Act, and threatened to hike it to 15 per cent. Now, the US has launched an umbrella investigation against 16 nations, including India, related to Section 301 of a law that deals with unfair trade practices.

By this Summer, says Jameison Greer, US Trade Representative, several nations such as India, China, Japan, and the European Union (EU) may face new tariffs under the section’s investigations. Later, more nations will come into the fold, which may include Taiwan, Vietnam, Malaysia, Singapore, and Norway. Hence, the list includes friends and foes, and part-friends like India. There are many like Japan and the EU, which wish to renegotiate bilateral trade deals after the Court order, and India, which wants to go beyond the agreed trade framework. Tariffs under this law may be beyond legal scrutiny.

“So, these investigations will focus on economies that we have evidence, (and) appear to exhibit structural excess capacity and production in various manufacturing sectors, such as through larger persistent trade surpluses or underutilised and unused capacity,” Greer explains. Hence, the probe will examine the larger economic issues such as trade surpluses, government subsidies, lower wages, inadequate standards, and lending and currency practices. In effect, the US will determine if these nations use policy and financial measures to help their firms to export goods to America unfairly, and cheaply. As per the Section 301, the US can follow due procedure, and impose new tariffs.

The timing is crucial. After the Supreme Court order, Trump imposed the 10 per cent tariff under a trade Act, which is applicable for 150 days, after which he needs it to be ratified by the Congress. The deadline expires in July this year. However, ever since the beginning of his second tenure, the president does not wish to do this, and wants to unilaterally and personally determine the trade and tariff policies. He will use Section 301 to fast-track the investigations to complete them by July, at least against some nations, and impose new tariffs to replace the 10 per cent ones. He will thus maintain a continuity.

According to Greer, and other US officials, the current investigations will move at breakneck speed. The public comments and feedback will be accepted by April 15, and hearings will be scheduled in the first week of May. In another two months or so, the results will be out. Although one is not sure, the outcome may lead to new tariffs, although the resistance against Trump, within the government, and among the Republicans, is on the rise. One is not sure how the courts will interpret it. They may insist on specific sector-specific investigations, rather than omnibus ones on nations, and national policies.

Section 301 was used before, even during the first term. According to a media report, it justified the imposition of a tariff of 25 per cent on several Chinese imports since this legal tool is “widely seen as more resilient to court challenges” in the country. Even some of the Indian products faced higher tariffs under these investigations. Several months ago, the US officials threatened India with 301 investigations against pharma exports, which comprise a large portion of Indian exports. At that time, the feeling was that the tariff could be as high as 100-200 per cent. Possibly then ongoing trade negotiations dented the move.

Greer wants the 301 investigations to be extended to include other macro factors. He feels a new probe will cover 60 nations, and examine a ban on foreign goods that are made with forced labour. According to a media report, this measure was used before. “The US has already tightened restrictions on solar panels and other products from China’s Xinjiang province under the Uyghur Forced Labour Protection Act signed by the former president, Joe Biden. The new investigation could expand similar actions to other countries,” the report explained. Washington accuses Beijing of using labour camps for ethnic Uyghurs and other Muslim minorities to make goods. Beijing denies it.

The extension of the 301-related probe to labour-related issues is interesting. In the Supreme Court order, which squashed the president’s emergency powers to impose tariffs or taxes, one of the major contentions was that the law was never used by any president in the 50 years of its existence. In the case of the labour-related tariffs, if imposed, there is a clear precedent. The former president used it a few years ago. No one opposed it. In general Section 301 was used quite extensively, although primarily on specific sectors, and not nations. Thus, Trump will wriggle out of a major legal challenge.

Including India in the first batch of 16 nations for the Section 301 probe seems to be tactical. New Delhi gladly signed a bilateral trade framework with Washington, which was to be finalised this month. However, after the Supreme Court order, and the ongoing Iran war, the situation has changed. India hopes to renegotiate some of the clauses in the framework, especially after the political criticism at home. The US has warned that any nation that wishes to do so will face another tariff backlash. The threat under Section 301 is one of them. Indian pharma and Indian agriculture may face the brunt of the new taxes.

According to a media report, “India’s inclusion reflects longstanding concerns in Washington about certain trade policies that are seen as limiting American access to its markets. Issues often cited include relatively high tariffs on some goods, rules on local sourcing and data storage, regulations affecting technology and digital services, and price controls in sectors like pharmaceuticals. While India has been negotiating trade matters with the US for years, these policies are viewed by American officials as potential barriers to US businesses, making it a candidate for a Section 301 review…. While inclusion in the probe does not mean immediate penalties, it does place India under the microscope, and creates a legal pathway for potential trade actions in the future.” It opens a way to increase diplomatic pressure.