Economic Hotspot Q&A | Why US Tariffs Will Not Be Removed After Expiration
The US tariffs are going to 'change their armor' again.
In February of this year, after the US Supreme Court ruled that the large-scale tariffs imposed by the Trump administration were unconstitutional, the Trump administration quickly switched to Section 122 of the 1974 Trade Act to impose a temporary 10% import tariff on most imported goods worldwide for a period of 150 days. Now, the 150 day "deadline" will expire on the 24th, and the United States is preparing to implement a new round of tariff measures on 60 countries and regions under the guise of "forced labor" under Section 301 of the 1974 Trade Act, in an attempt to achieve "seamless integration".
The legal names are constantly changing, but what remains unchanged is the policy orientation of the United States to continue to impose excessive tariffs and increase trade restrictions. Why do US tariffs always' expire and not be taken down '? How should other economies respond?
How to extend the lifespan of tariffs
Many observers believe that US tariffs have evolved from temporary trade measures to long-term policy tools. At present, the US government is not considering whether to impose tariffs, but rather how to extend the tariffs.
In March of this year, the Office of the United States Trade Representative launched a "301 investigation" against 60 major trading partners on the grounds of "failure to establish and effectively enforce a ban on forced labor imports", and in June "recommended" additional tariffs of 10% to 12.5% on goods imported from these economies to the United States. It is widely believed that this is a "good idea" conceived by the US federal government to avoid a "tariff vacuum".
Many international legal scholars have expressed that adopting the "301 clause" to continue tariffs is essentially imposing domestic standards and unilateral rules of the United States on other economies, lacking international legal basis and deviating from the rules of the multilateral trading system. This not only increases policy uncertainty faced by global businesses, but also weakens the stability and predictability of the multilateral rules of the World Trade Organization, posing a sustained impact on the multilateral trading system centered around the WTO.
Chad Bowen, who served as the Chief Economist of the US State Department during the Biden administration, believes that in recent years, US trade policy has increasingly leaned towards shaping the international trade environment through domestic laws rather than multilateral rules.
The International Emergency Economic Powers Act, the 1974 Trade Act, the Section 301 investigation... the US government is searching for "birth certificates" for one tariff "new name after another. At present, the United States has formed a parallel pattern of multiple trade restriction tools: "Section 232" emphasizes national security, "Section 301" accuses "unfair trade", "Section 122" is used for international balance of payments imbalances, export controls target key technology outflows, and investment reviews target the "national security" risks that foreign capital may pose.
CNN commented that the Trump administration's trade policy is "one tariff after another".
Why persist in raising taxes
In recent years, the trade policy of the United States has become increasingly politicized. More than a decade ago, the reason claimed by the United States for imposing tariffs was often due to targeted countries adopting subsidy measures or companies dumping in the United States. Nowadays, more and more trade measures in the United States are cloaked in political coats such as "national security," "supply chain security," "forced labor," and "values.
Why did this situation arise? Analysis suggests that in recent years, the Republican and Democratic parties in the United States have converged policies in promoting the return of manufacturing, industrial and supply chain security, and tariffs have become the most direct and easy "achievement" to showcase to voters. In this context, trade policy has gradually become a tool for political mobilization. For this reason, the Biden administration retained most of the tariff policies from Trump's first presidential term after taking office.
The Brookings Institution in the United States pointed out that Trump attempted to make tariffs the core of his "economic nationalism" during his second term, and tariffs are not only economic policies, but also related to his political image.
In the eyes of many American politicians, tariffs seem to be able to solve the "real problems" of the US government. According to data from the US Treasury Department, as the scope of tariffs expands, the federal government's tariff revenue has significantly increased. However, agencies such as the Congressional Budget Office and the Tax Foundation have stated that tariffs increase fiscal revenue, but in reality they are "domestic taxes" because tariffs are passed on to American importers and consumers.
In fact, tariffs have exacerbated the government's policy failure in economic regulation, which not only does not contribute to the development of the US economy, but also reduces the efficiency of resource allocation and increases the burden on ordinary people. According to calculations by the Yale University Budget Lab, US tariffs have pushed up household spending and increased business operating costs.
How to deal with trading partners
The Director General of the World Trade Organization, Viola, has repeatedly warned that if trade policies are formulated based on geopolitics rather than market rules, the global economy will face long-term challenges such as decreased efficiency, rising costs, and slower growth. The International Monetary Fund has also pointed out in its research that if the world economy is artificially torn apart by policies such as tariffs, global economic output may face huge losses.
Tariffs may affect the flow of goods, but they are difficult to change the division of labor in the industrial chain. Faced with the significant risks posed by the United States' excessive tariffs on global trade, regional trade cooperation is constantly strengthening, and governments and businesses around the world are seeking ways to respond.
According to data from international organizations such as the World Trade Organization, in recent years, intra regional trade in ASEAN, the Middle East, Latin America, and other regions has grown rapidly. Global trade has not significantly shrunk due to tariffs, but has shown a trend of regionalization and diversification.
Many economists believe that the global market is constantly hedging against the policy impact of US tariffs through supply chain restructuring, regional cooperation, and market diversification.
More and more observers are realizing that the deep impact of US tariffs lies in the risks they bring to the world through their long-term, institutionalized, and pan security measures. Tariffs may change trade routes, but they are difficult to reverse the trend of economic globalization and international division of labor. What world trade truly needs is a stable, transparent, and predictable international economic and trade environment, rather than the political drama of the United States' "tariff relay".