COMMENTARY:
For months, the U.S. has been involved in a Middle Eastern war with Iran. Now, we have potentially entered another war – a trade war – with much of the world. On July 24, the Trump Administration imposed a slew of new tariffs on more than 60 countries, based on what is described as ‘the failure to impose or effectively enact prohibitions on imports made with forced labor.’ Section 301 of the U.S. Tariff Code was invoked to impose these latest tariffs. According to the U.S. Trade Representative’s website, Section 301 tariffs are intended to “penalize foreign nations for unfair trade practices, intellectual property theft, or inadequate enforcement against forced-labor imports.” The Trump Administration is contending that the failure of countries to ban imports made with forced labor is creating an unfair trade disadvantage against U.S. products.
In 2025, Trump imposed the International Emergency Economic Powers Act (IEEPA) to impose tariffs on countries across the globe. These tariffs can be used during national emergencies. Last February, the Supreme Court ruled that the IEEPA tariffs were improperly and illegally used by the Trump Administration to restrict imports. To get around the Supreme Court ruling, Trump again reimposed tariffs using Section 122 tariffs, which can be used to address severe balance-of-payment issues. These can only be imposed for 150 days, and expired on July 24. The new Section 301 tariffs are a new way, albeit a third way, to find a loophole to impose tariffs.
These new tariffs apply a 10 percent tariff on countries that have already enacted forced labor bans, signed reciprocal bans, or have committed to doing so. These countries include Mexico and Canada. For some countries subject to the new tariffs, a formula subtracting the Most Favored Nation rate is used. For countries such as Japan and South Korea, this will result in a 12.5 percent tariff. A flat 12.5 percent rate is to be applied to all countries that have not enacted forced labor bans. The tariffs will not be imposed on imports that are deemed “critical.”
The new Section 301 tariffs will affect a slew of U.S. imports, ranging from automotive components to agricultural products.
On July 20, Trump also announced that he was invoking the rarely used Section 338 of the U.S. Tariff Act to impose 50 percent tariffs on certain imports from Canada. This particular tariff category is used to address discrimination by foreign countries, thus placing the commerce of the U.S. at a disadvantage. The justification Trump is using to impose these new tariffs on Canadian products is what he perceives as negative trade practices by Canada by discriminating against U.S. alcohol, dairy, and automotive manufacturers. Canada has applied tariffs on some of these products during the current Trump Administration. Ironically, it did so in retaliation because the U.S. first imposed tariffs on Canadian imports to the U.S.
We can expect to see prices rise on Canadian alcohol, automotive products, and certain dairy products. There were products specifically excluded during this latest announcement. These include products in the energy sector and goods that previously had been addressed by sector. It is not clear how these new Canadian tariffs will exist within the context of the U.S.-Mexico-Canada Agreement (USMCA), which specifically allows North American-made products with a certain local materials/labor content to enjoy low or duty-free sale within the three North American countries. The Trump Administration announced that with these new tariffs there will be no carve-outs for goods protected by the USMCA. These new tariffs will begin on August 19.
Canada is certain to challenge these new tariffs, and possibly retaliate by imposing new tariffs on U.S. imports to Canada. This is also certain to exacerbate the strained diplomatic relations between the two nations, started when Trump kept referring to Canada as the “Fifty-first U.S. state” early in his second term.
I have several observations about this third round of tariffs: The newest tariffs are sure to exacerbate inflation and thus put pressure on the slowdown of the economy. Countries whose products will be tariffed will most likely retaliate, thus deepening a trade war ignited by these and previous tariffs. Angry consumers across the world will voluntarily reduce their purchase of American products. Because it cannot rely on the U.S. as a stable trade partner, Canada will continue to build diplomatic and economic relations with other countries, such as China.
From the U.S. standpoint, USMCA appears to not be worth the paper it is written on. The ongoing trade discussions regarding the USMCA will now pivot from productive dialogue on improving the agreement to damage control. Nobody in the Trump Administration has been able to convince Trump that tariffs are a tax on the U.S. consumer, which causes wealth depletion and economic hardship. Finally, whether tariffs are justified or not, the Trump Administration concocts a way to say that they are.
Jerry Pacheco is the president of the Border Industrial Association.
Jerry Pacheco's opinions are his own and do not necessarily reflect the views of KRWG Public Media or NMSU.