After completing investigations into the US’ major trading partners over the importation of goods produced with forced labor under Section 301 of the Trade Act of 1974, the Office of the US Trade Representative (USTR) on Tuesday last week announced that it had proposed additional tariffs on 60 economies that failed to establish or effectively enforce systems to prohibit such goods and had begun soliciting public comments.
The proposed measures consist of two tiers of tariff rates: 10 percent and 12.5 percent. Since Taiwan has committed to imposing a ban imports of goods made using forced labor under the Reciprocal Trade Agreement (ART) with the US, it was included on the list of 14 economies with a 10 percent tariff rate. The other 46 economies, including Japan, South Korea, China and India, face the 12.5 percent tariff rate.
The USTR’s proposed tariffs are still under consultation. The tariff measures are not expected to take effect soon, as there are still other procedures to go through, including written comments, public hearings, industry feedback and adjustments to the exclusion list. However, once implemented, the Section 301 tariffs, as well as those on Taiwan’s auto parts and wood products announced last month under Section 232 of the Trade Act of 1962, would be more entrenched and harder to reverse.
The latest spate of tariffs is regarded as a follow-up measure by US President Donald Trump to rebuild Washington’s tariff framework for pressuring other countries. After the US Supreme Court in February ruled that Trump’s tariffs on trading partners under the 1977 International Emergency Economic Powers Act (IEEPA) were illegal, he immediately imposed a flat 10 percent tariff on all imports under Section 122 of the Trade Act of 1974. As those Section 122 tariffs are to expire next month due to a 150-day limit on temporary import surcharges under Section 122, the imposition of Section 232 and Section 301 tariffs are part of Washington’s efforts to rebuild its long-term tariff strategy.
What do Section 301 tariffs mean for Taiwan then? The good news is that Taiwan was not singled out by the USTR in the Section 301 investigations this time, and it does have a relatively favorable tariff rate compared with trade rivals such as Japan, South Korea and China.
The direct impact on Taiwan’s tech exports, such as AI servers and information technology products, remains manageable due to strong US demand and few alternatives in the market. In addition, semiconductors and electronic components already subject to Section 232 tariffs are excluded from Section 301 action.
However, non-tech exports, including machinery, machine tools, plastics, rubber, auto parts and consumer goods, are sensitive to price competition. They are likely to face significant pressure on profit margins if the final Section 301 tariffs are implemented. Meanwhile, textile, apparel and footwear products carry a higher compliance risk, suggesting that what matters to them is not only the final tariff rate but whether raw material sources and supply chain audits meet US requirements.
While Taiwan signed the ART with the US in February, the agreement has yet to be ratified by the Legislative Yuan, and the 301 investigations have added pressure to Taiwan over its compliance commitments. If subsequent ART-related procedures are delayed, it might weaken Taiwan’s ability to secure preferential treatment from the US.
On balance, the purpose of Section 301 and Section 232 tariffs is to prevent forced-labor products or low-cost production inputs entering the US, directly or indirectly, creating an unfair competitive environment and harming US national security. One notable implication of these actions is that they would essentially require businesses and countries to incorporate compliance costs into their foreign trade strategy. It is difficult for countries to completely avoid such tariffs, as the final rollout decision lies with the Trump administration, which acts as the judge, jury and executioner.
The more complex problem is that Trump’s trade war continues, with his tariffs becoming more complicated, targeted and institutionalized. The USTR is expected to release findings from its separate Section 301 investigations into structural overcapacity and manufacturing overproduction across 16 economies later this month. The agency could propose further sector-focused tariffs based on the findings.
As such, the global trade landscape faces challenges, as a more durable US tariff framework is in the making, and a more hawkish US trade policy lies ahead.
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