US seeks to close $1.6 trillion revenue gap with raft of new tariffs
The Trump administration this week stepped up its ambitious effort to replace about USD 1.6 trillion in lost tariff revenue that was eliminated by the Supreme Court’s decision to strike down a range of the president’s import taxes.
Recovering that lost revenue, which the White House was counting on to help offset the steep, multi-trillion-dollar cost of its tax cuts, is possible but will be challenging, experts say. The administration has to use different legal provisions to impose new duties, and those provisions require longer, complex processes that US companies can use to seek exemptions. It could be months or more before it is clear how much revenue the replacement tariffs will yield.
“I wouldn’t bet against this administration being able to get back on paper the same effective tariff rate they had before,” said Elena Patel, co-director of the Urban-Brookings Tax Policy Center. But the new approach will “make it easier for people to contest the tariffs, which is going to put a big asterisk on the revenue until all that is settled.”
On Wednesday, US Trade Representative Jamieson Greer said the administration will investigate 16 economies — including the European Union - over whether their Governments are subsidizing excessive factory capacity in a way that disadvantages US manufacturing. The investigation will also cover China, South Korea, and Japan, Greer said.
In addition, he said there would be a second investigation of dozens of countries to see if their failure to ban goods made by forced labor amounts to an unfair trade practice that harms the United States. That investigation will also cover the EU and China, as well as Mexico, Canada, Australia, and Brazil.
Both investigations are being conducted under Section 301 of the 1974 Trade Act, which requires the administration to consult with the targeted countries, as well as hold public hearings and allow affected US industries to comment.
A hearing as part of the factory capacity investigation will be held on May 5, while a hearing on the forced labor investigation will occur on April 28. It’s a far cry from the emergency law that President Donald Trump relied on in his first year in office, which allowed him to immediately impose tariffs on any country, at nearly any level, simply by issuing an executive order.
Moments after the Supreme Court’s ruling, Trump imposed a 10 percent tariff on all imports under a separate legal authority, but that duty can only last for 150 days.
The president has said he would raise it to 15 per cent, the maximum allowed, but has yet to do so. Some two dozen states have already challenged the new tariffs.
