Another Round of Bogus Tariffs Is Coming

In the days ahead, one dubious set of replacement tariffs will give way to another. The “Section 122” duties that President Donald Trump imposed this spring—meant to replace the “emergency” tariffs struck down by the Supreme Court in February—will lapse this coming Friday, 150 days after their invocation. Into that possible gap will likely step a fresh tranche of “Section 301” duties, allegedly aimed at curbing the use of “forced labor” worldwide.

As we’ve noted, the problem of forced labor is genuine and intricate. Walk Free, a human-rights group that monitors this issue, estimates that around 28 million people were in some form of forced labor globally as of 2023, while the International Labour Organization puts about 5.5 million of those workers in tradable-goods sectors. Even free-market advocates like me acknowledge that trade in goods produced under coercion isn’t really “trade”—not a voluntary, mutually beneficial exchange at all.

In the present Section 301 case, however, the phrase “forced labor” functions mainly as a legal cover. As Rick Woldenberg, CEO of Learning Resources and a lead plaintiff in one of the Supreme Court tariff disputes, wrote when the probe began, the case seemed like a “sham” from the outset because “the decision to impose these taxes has already been made.”

What the Trump administration ultimately produced has sadly vindicated Woldenberg’s critique.

The conclusions appeared preordained. The methodology was only marginally robust, to the point of embarrassment. The remedy was blunt to a fault and wildly out of proportion to any measurable distortion in the economy. The measure offers no mechanism for targeted countries to have tariffs lifted by addressing their behavior, and it establishes a precedent for an “automatic tariff generator” that a future president could use at will. It trivializes a real challenge and risks undermining meaningful reform. And Congress is unlikely to intervene.

After the Supreme Court voided the administration’s “emergency” IEEPA tariffs in February, the White House scrambled for an alternative. It initially turned to Section 122 of the Trade Act of 1974, a rarely used balance-of-payments mechanism, to impose a flat 10 percent tariff on goods from nearly every trading partner. Those tariffs are legally and economically dubious, a lower court has already struck them down (the case remains on appeal), and by design they expire 150 days after imposition—a deadline that arrives tomorrow.

U.S. Trade Representative Jamieson Greer has suggested the administration might simply declare another “balance of payments crisis”—and another round of Section 122 tariffs—when the current ones end on Friday, but that would raise even bigger legal problems than the present taxes. So, eventually, Section 301 would take over. The only question is when. (Don’t you just love policy uncertainty! Sigh.)

Unlike Section 122, Section 301 requires a real investigation, a public notice-and-comment process, and a formal report before any executive action can be taken. Under the statute, the U.S. Trade Representative may respond to foreign “acts, policies, and practices” that are “unreasonable or discriminatory” and that “burden or restrict” U.S. commerce, with “unreasonable” acts being those that are “unfair or inequitable.” As I argued in a 2022 paper, this language is dangerously broad and vague, inviting potential abuse—abuse the Trump administration is now pursuing in the forced-labor case.

Yes, it’s a reverse-engineered sham.

In June, Greer’s office closed its investigation, finding that 54 economies had failed to prohibit imports made with forced labor and that six more had failed to enforce the laws they already had on the books. The agency recommended tariffs totaling 12.5 percent on goods from 46 of the noncompliant economies and 10 percent on goods from 14 more (the six with enforcement gaps and eight that had pledged to implement prohibitions under their Trump-era trade deals). Collectively, these targeted countries account for nearly all of what the United States imports.

USTR’s stated justification is that these economies’ failure “to impose and effectively enforce a forced labor import prohibition” is “unreasonable” and a burden on U.S. commerce, “by subjecting U.S. producers to unfair competition from forced labor goods both in export markets and the U.S. market, and by displacing foreign goods produced without forced labor or forced labor inputs into the United States and other markets.”

Bold language. There are several reasons to doubt that the administration truly believes any of it.

The administration announced tariffs before the investigation finished.

Under Section 301, USTR is supposed to investigate first, decide later, and—if needed—impose countermeasures to push a foreign government to correct its burdensome or “unfair” trade practice. One can debate whether a country’s findings and recommendations are right, but surely everyone can agree that—the text of the law itself makes this explicit—the conclusions aren’t supposed to be prewritten.

Here, by the administration’s own admission, they were.

From early on, Treasury Secretary Scott Basse… err, Bessent repeatedly said the tariff revenue would be “back in place at the previous level” by the time the Section 122 duties expired this month, and administration officials described the Section 301 push as a way to recover the revenue lost when the Supreme Court struck down IEEPA. Trump himself echoed much the same sentiment shortly after the court’s ruling, noting that, along with Section 122, “We are doing the various investigations necessary to put fair tariffs—or tariffs, period—on other countries.” A few weeks later, USTR Greer confirmed the timetable, saying he hoped to finish the investigations “before the 10 percent tariffs imposed by President Trump in February under Section 122 expire in July.”

When the president, the treasury secretary, and the United States trade representative all confidently forecast a specific outcome before the inquiry is complete, the “investigation” phase becomes little more than a formality—an empty box to tick for legal cover and nothing more.

The forced-labor report is unusually thin.

The report itself reinforces this conclusion. For a document meant to justify tariffs on more than $1 trillion of trade with 60 countries (including several allied nations), the report is almost devoid of concrete evidence. For instance, the USTR offers virtually no proof that the targeted countries actually export goods produced with forced labor. In most cases, the report merely notes that a country lacks an express ban on goods made with forced labor and then simply assumes certain “forced-labor goods” are making their way through. The country-by-country assessment totals about 31 pages—roughly half a page per country—and much of that content is repetitive blocks copied and pasted dozens of times. Even admits that foreign governments and private firms “may conduct due diligence” to prevent forced-labor trade without an express legal obligation to do so. Its only counterargument is that “some” may fail to do so—hardly robust evidence of widespread wrongdoing and harm.

The agency also provides no proof or analysis of its central claims that forced labor creates “unfair export competitiveness,” or that forced-labor goods undercut U.S. producers (and thus meet the law’s remedy criteria). In reality, a company that uses forced labor could still sell at market prices and pocket any savings from paying workers under market wages. In the most prominent recent U.S. forced-labor prosecution, the Georgia “Blooming Onion” case, the alleged offenders—some in the U.S., some in Latin America—made more than $200 million by paying trafficked workers pennies while selling the produce at ordinary prices. The beneficiary was the trafficker, not American shoppers seeking ultra-cheap groceries (at the expense of law-abiding competitors). In the Section 301 report, however, USTR simply assumes the opposite, arguing it harms American producers in the process.

There’s also no justification for the blanket tariff rates assigned to the targeted countries. Most strikingly, USTR set the same 12.5 percent rate for Angola, Libya, Russia, Venezuela, and Kazakhstan—developing nations with weak rankings on Walk Free’s forced-labor index—alongside developed, “good-actor” economies like Norway, Japan, Switzerland, and Australia. Why this is so remains unexplained, nor does it justify the proposed reduced tariff rate for certain apparel and textiles, which are among the most common goods tied to forced labor globally. (Spoiler: see the lobbyists.) Rather, the proposed tariffs seem to mirror the expiring Section 122 rates and the various deals struck by the administration in the past year. They also include many exemptions for politically sensitive products and goods already hit by other tariffs, mirroring the earlier regimes.

I’m sure it’s all just a coincidence.

The United States is itself hardly a model on forced labor.

Meanwhile, the conclusions USTR does offer often range from questionable to outright absurd. Notably, the United States is not well-positioned to lecture other nations about forced labor. Section 307 of the Tariff Act of 1930 has barred imports produced with forced labor since 1930, but enforcement was limited for decades due to a broad “consumptive demand” exception that allowed imports of goods not produced domestically “in such quantities as to meet U.S. consumption needs.” Congress narrowed that exception in 2022 to focus on goods from Xinjiang, China (via the Uyghur Forced Labor Prevention Act), but this change still wasn’t a global ban. More importantly, the Trump administration’s enforcement of Section 307 appears more lenient than during the Biden era. A recent letter from Oregon Senator Ron Wyden notes that the U.S. Forced Labor Enforcement Task Force hasn’t added a single firm to the UFLPA “entity list” since January 2025, and U.S. Customs detained only $166 million in shipments under the UFLPA last year, down from roughly $1.76 billion in 2024 and $1.42 billion in 2023.

By Walk Free’s own index, the United States is actually worse on forced labor than about half (26) of the countries named on USTR’s tariff list. (If you treat the EU as a single economy, America still falls to the 19th rank.) Indeed, the U.S. is somewhat unusual globally in that our Constitution explicitly permits prison labor. As the Marshall Project recently reported, “Incarcerated workers help manufacture over $2 billion in goods annually” and are typically paid far less than a dollar an hour (or not paid at all). Much of this work benefits government entities like schools and the DMV, yet, as the Associated Press found in 2024, a sizable portion ends up in private, open markets and even “in the supply chains of goods shipped around the world by multinational companies, including to nations that have themselves faced import bans for forced labor.” The Trump administration does not appear particularly concerned about any of these forced-labor goods.

The tariff fix overshoots the problem.

Even if the targeted nations were truly at fault, the remedy proposed by the United States is vastly too large. The U.S. government prohibits imports produced with forced labor, and these restrictions have, even in the tougher Biden years, covered only a small fraction of total U.S. imports. The new tariffs, by contrast, would cover trillions of dollars in goods.

The UFLPA totals don’t capture every incident of forced labor in U.S. commerce because some imports may slip through loopholes. But rough calculations indicate that, while forced labor is a serious problem, its overall impact on the U.S. economy is tiny relative to the size of the tariffs being proposed.

Using Walk Free’s latest forced-labor estimates (2023), global manufacturing employment figures from the International Labour Organization, and U.S. import data, we can approximate both the share of the global manufacturing workforce involved in forced labor and the volume of global goods trade plausibly linked to it. We calculate that forced labor accounts for about 4.16 percent of manufacturing employment in the 60 targeted economies (approximately 17.8 million of 426.9 million workers). Multiplying by the roughly $2.46 trillion in manufactured goods these countries supplied to the U.S. in 2023—last year with forced-labor data—that yields a ceiling of roughly $102 billion in “tainted” goods out of the $3.05 trillion imported by the U.S. in 2023 (about 3 percent) and the $26 trillion in world trade that year (0.4 percent).

This estimate is intentionally upper-bound; USTR’s own theory of harm is far narrower. Its report contends that the necessary injury to U.S. commerce is the competitive edge that forced-labor goods gain by avoiding standard labor costs and regulations. If we suppose labor costs account for 15 to 25 percent of a firm’s total manufacturing cost, then the “avoided-wage” advantage embedded in that $102 billion would amount to roughly $15 billion to $26 billion. So, a tariff designed to offset that distortion, which is the core goal of Section 301 and what the USTR report describes, would end up being less than 1 percent (roughly 0.5 to 0.84 percent).

USTR is aiming for a 10–12.5 percent tariff.

These are rough calculations with many assumptions, but other estimates reinforce the idea that the tariffs are far too expansive. Notably, Peterson Institute economist William Cline used a different framework to estimate both U.S. exports lost to unfair competition from forced-labor goods in OECD markets and the direct costs of forced-labor products entering the United States. His finding—lower, as expected from a macro model that accounts for overall trade distortions and the dilution of forced-labor inputs in global supply chains—suggests a warranted forced-labor tariff of only about 0.23 to 0.25 percent.

Even looking at tariff revenue alone yields the same conclusion. The Committee for a Responsible Budget estimates that Section 301 tariffs could bring in around $97 billion per year over the next decade—an amount dwarfed by the modest, low-billion-dollar distortion associated with forced labor.

Three distinct methods all converge on one point: this is a Trump-era tariff replacement wrapped in a human-rights label.

There’s no off-ramp.

In response to these calculations, one might argue that forced labor is such a repugnant problem that a deliberately punitive tariff is warranted to compel international compliance, even if that means sacrificing proportionality. Yet, even setting aside whether that is the right theory—or what the law actually requires—the tariff design contradicts itself. The proposed Section 301 action provides no compliance off-ramp for targeted countries and notably omits several developing nations (for example, Turkmenistan, Malawi, and Mauritania) that trade with the U.S. and have verifiable forced-labor concerns.

Section 301 instructs USTR to address foreign practices that injure U.S. commerce and to achieve a change to or removal of the offending policy (there’s some history here). If these tariffs were truly about ending forced labor, USTR would present an offer to remove tariffs if a country enacted new laws or demonstrated tighter enforcement. (By the way, Canada, the European Union, and Mexico either maintain or are implementing forced-labor import bans—indeed, the EU’s approach goes even further than America’s.) Yet there are no benchmarks showing how a country could have the tariffs dropped, and a country could even adopt the United States’ own forced-labor framework and still see its imports taxed—because tariffs are the point.

Here’s how this is supposed to function.

Perhaps the clearest way to grasp the emptiness of the forced-labor tariffs is to compare them with the Section 301 penalties imposed on Chinese imports during Trump’s first term. The case against Chinese intellectual property and industrial policy wasn’t flawless, but it still required an eight-month investigation and produced a nearly 200-page country report. The recommended tariffs—initially set at $50 billion to match the alleged harm—emerged only after U.S.–China negotiations collapsed (and they then escalated dramatically in response to Chinese retaliation).

This time around, USTR claims to have fully reviewed 60 economies in 82 days. Its 80-page report offered each country only a few scant paragraphs, and the agency moved straight to disproportionately sizable tariffs without meaningful negotiations with the alleged offenders—tariffs that it had pre-announced and that merely echo the regime the president has spent more than a year trying, and failing, to preserve.

The forced-labor action represents a clear misuse of the law and marks a substantial departure from established U.S. practice, even under President Trump. By any reasonable standard, it cannot be seen as anything other than a ham-fisted attempt to reinstall a tariff wall and shield it from another IEEPA-like defeat in federal court. The latter route may work: Section 301 is legally sturdier than the untested IEEPA, and while the forced-labor case is flimsy, a court might still hesitate to question the president’s determinations and actions. We shall see.

If the courts endorse these tariffs, the implications could extend far beyond this particular sham case. Section 301 could become a vehicle for slapping tariffs on any nation, at any rate, for any duration, so long as the law’s procedural boxes are checked. The substantive merits of the case and the quality of the agency’s findings may not matter much. Simply assert that a country fails to do something you deem harmful and then apply blanket tariffs after hollow hearings and comments. Voila.

This is precisely the broad, tariff-driven power grab that the courts checked with their IEEPA rulings—only dressed up with a bit more procedural window-dressing. If that trend continues, Section 301 would become a general tariff tool rather than the targeted instrument Congress intended, and it will be used by Trump or any future president who seeks to tariff trading partners over carbon emissions, labor standards, AI regulation, or other issues. Republicans praising the forced-labor tariffs today should consider how they’ll feel when a future Democrat wields the tariff pen.

Forced labor is a critical issue that deserves a serious policy response. This approach, however, is not it. By wrapping Trump’s tariff ambitions in the rhetoric of human rights, the 301 action risks discrediting diplomatic, economic, and enforcement tools that could actually work and could invite political backlash in places that need real improvement. That’s unfortunate, and it likely won’t be the last such misstep before Trump leaves office. (There’s another Section 301 action—on excess capacity—reported to be on the horizon.)

The only real question remains whether enough members of Congress will eventually care enough to act.

Independent distributors and lab-grown diamonds are eroding the grip of a once-dominant, often corrupt diamond cartel: “De Beers is pausing production at South Africa’s largest diamond mine for at least two years due to collapsing prices, as the market price falls to roughly half of what it was four years ago.”

Exploding farm subsidies (related):

Not good:

Creative destruction: