Trump’s latest tariff proposal has a new rationale, but the same outcome

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For a man who has been accused of having a short attention span, President Trump has shown unwavering commitment to impose tariffs on America’s trading partners, friend and foe alike. He has been steadfast in seeking to reduce U.S. trade deficits and to restore manufacturing, even though the results have fallen short of his goals.

One thing that has changed are the legal justifications the Trump administration has used to impose higher duties. Following the Supreme Court’s decision to strike down the use of reciprocal tariffs under the International Emergency Economic Powers Act, Trump implemented a broad 10 percent global tariff that primarily relies on Section 122 of the Trade Act of 1974.

With that action set to expire soon, the Trump administration has recently proposed duties of 10 percent or 12.5 percent on imports from 60 countries for exporting goods that are made with forced labor. The U.S. Trade Representative’s office plans to apply Section 301 of the Trade Act of 1974, which authorizes it to investigate and retaliate against practices that violate trade agreements or harm U.S. commerce.

The Trump administration used Section 301 in his first term to impose duties on China and the European Union, and the tariffs have survived multiple court challenges. However, no administration has previously used the provision in such a sweeping way. The EU has challenged the application on grounds that its practices on forced labor are stricter than those in the U.S.

Although the intent is to keep higher tariffs in place, many trade experts question whether the courts will concur with the application of the statute to a broad number of countries. The assessment of Alan Wm. Wolff of the Peterson Institute for International Economics is that the courts are likely to rule that it is just another attempt to transfer the full tariff power from Congress to the president.

One reason the Trump administration is targeting the use of forced labor may be to garner support from Democrats and labor unions. However, some observers question the motive. Edward Aldean of the Council of Foreign Relations has called the announcement a “transparently cynical effort” and a “pretext to maintain tariffs that the administration believes has been effective.”

In the event the Section 301 tariffs pass legal muster, what would the likely impact be on the U.S. economy?

To answer this question, one must first assess what the average effective tariff rate would be. The Tax Foundation does so by calculating actual tariff revenues as a share of total good imports.

These calculations show that when the International Emergency Economic Powers Act tariffs were in effect in 2025, the average U.S. tariff rate increased to 7.7 percent from 2.4 percent in 2024. Subsequently, as those were replaced with temporary tariffs of 10 percent on imports, the Tax Foundation estimates the average effective tariff rate this year will be 5.3 percent. With the new Section 301 tariffs in the range of 10-12 percent, it is reasonable to assume that the average tariff rate would be similar.

Since Trump made his Liberation Day announcement in April 2025, the economic impact of tariffs has not been as large as many economists anticipated. One reason is that some goods were exempted from the tariffs to mitigate their economic impact. Another reason is that the U.S. struck bilateral deals with key trading partners, who negotiated lower rates. Altogether, U.S. tariff policy has changed more than 50 times since last April 2, according to the Tax Foundation.

At the same time, the evidence indicates that the tariffs have not achieved President Trump’s stated objectives thus far. The U.S. merchandise trade deficit in 2025, for example, wound up $25 billion larger than in 2024. Nor have the tariffs led to a revival of U.S. manufacturing, as President Trump asserted. In fact, there were ongoing job losses in manufacturing last year for the third consecutive year, according to the Bureau of Labor Statistics.

One factor that President Trump has not weighed in assessing his trade policy is the impact that tariffs have had in boosting good prices. He continues to maintain that the cost of tariffs is borne by foreign exporters rather than by U.S. businesses and households. Yet, numerous studies, including a recent one by the New York Federal Reserve, conclude that U.S. households and firms overwhelmingly bear the burden of tariffs.

While these studies are dismissed by the Trump administration, public opinion polls show Americans disapprove of Trump’s tariffs by an overwhelming majority of 60 percent or more. Voters will have their say during the midterm elections, but Trump may not listen, even then.

Nicholas Sargen, Ph.D., is an economic consultant and is affiliated with the Darden School of Business. The second edition of his book, “Global Shocks,” is available now.

Trump’s latest tariff proposal has a new rationale, but the same outcome

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