Trump administration formalises tariff regime

On July 23, the Trump Administration announced a new set of tariffs, between 10% and 12.5%, on more than 60 trading partners. The tariffs came into effect at midnight eastern time on July 24. Reuters calculate the new rates cover 99.4% of imports. There are exemptions for some items, including oil, gas, some food items and fertilizers.   

These new tariffs replace temporary rates implemented after the Supreme Court largely removed the tariff regime that resulted from President Trump’s now-infamous ‘Liberation Day’ announcement.

The administration has adopted a new legal strategy, utilising Section 301 (b) and 304 (a) of the Trade Act of 1974, to impose tariffs targeting economies “failing to impose and effectively enforce and prohibition on the importation of goods produced under forced labour”. Under the new framework, countries considered to have made insufficient efforts to address forced labour concerns may face additional tariffs of up to 12,5% with certain exemptions, while a baseline tariff of 10% applying more broadly. 

Key details around the legal basis of these new tariffs:

• Forced labour-related measures are harder to contest through international and US legal mechanisms. The complexity of global supply chains makes it difficult for importers to demonstrate compliance with labour standards. 
• Foreign governments have expressed strong criticism of the US administration’s use of a human rights argument to support a protectionist agenda, so there will likely be challenges to this new wave of tariffs.  
• Australia, New Zealand and Japan described the measures as unjustified or “extremely disappointing,” while China condemned them as unilateral actions that undermine global trade. India warned that the tariffs could divert textile sourcing away from Indian exporters.  
• Others, including the UK and the EU adopted a more measured response, noting the new regime largely complies with their recent respective trade agreements with Washington.  
• Within the US, 25 US states have filed a lawsuit challenging the Trump Administration’s new Section 301 tariffs, arguing they unlawfully replace earlier tariffs struck down by the courts and exceed presidential authority. 

Key details for the movement of goods related to the wind power industry: 

• The US wind industry is operating under significant trade restrictions affecting imported components and raw materials. 
• Wind turbines and some key components already face tariffs of up to 50% on their steel and aluminium content under Section 232 of the Trade Expansion Act of 1962, which allows the US government to impose tariffs on imports deemed to threaten national security.   
• Many key inputs used in wind turbine manufacturing, particularly those originating from China, are already subject to Section 301 tariffs, introduced back in 2018 as a response to alleged findings of unfair trade practices related to China’s industrial policies, technology transfer requirements, and intellectual property practices. 
• Importantly, the additional Section 301 Forced Labor Tariff targets imports apply on top of existing Section 301 tariffs, including those on China-origin goods, but does not stack with Section 232 tariffs.  

Description: Estimated US Tariff Exposure for Key Wind Turbine Components. It lays out three layers of duties: (1) the baseline US tariff (Most Favoured Nation rate), (2) the new Section 301 forced labour tariff when applicable, (3) the additional Section 301 tariff on China-origin products, and (4) Section 232 tariffs on steel and aluminium content. Section 301 Tariffs imposed to China-origin products may affect not only Chinese manufacturers but also non-Chinese OEMs that rely on Chinese materials or subcomponents within global wind supply chains. 

Source: Harmonized Tariff Schedule of the United States & The White House 

What to look for in the coming weeks:

• The administration is expected to increase pressure through additional trade instruments, including investigations into industrial overcapacity, which could provide further legal justification for future measures.  

• Attention should also be paid to potential future disputes involving fines on major U.S. technology companies and broader tensions between the United States and the European Union.  

• Attention should also be paid to the outcome of the ongoing Section 232 national security investigation into wind turbine imports, as its findings could provide the basis for additional tariffs or other trade restrictions affecting the sector. 

Further Reading

• GWEC statement on fostering a fair, open, and transparent trade environment for global wind energy.​
• GWEC Launches Wind Action Plan To Break The Cycle of Energy Crises