Trump invokes 'forced labor' in tariff push, with China in the crosshairs

Analysts say the Donald Trump administration's decision to invoke "forced labor" as the legal basis for new tariffs under a Section 301 investigation is a deliberate move aimed at China, which faces longstanding accusations of using forced labor in its Xinjiang region. China also ranks among the three countries that would suffer the most if the threatened tariffs take effect.

The Office of the United States Trade Representative said June 2 it would impose tariffs of 10 to 12.5 percent on more than 60 countries after a broad Section 301 investigation found those nations had failed to establish clear bans on imports produced through forced labor.

Bloomberg reported Wednesday that the move is designed both to block trading partners from gaining an unfair competitive edge over the United States and to target China, which is widely accused of forcing Uyghurs and other ethnic minorities in Xinjiang into labor. The strategy, Bloomberg said, is to disadvantage countries that do not ban forced-labor goods from accessing the US market while countering China's overproduction and flood of low-cost goods.

The United States has banned imports made with forced labor since 1930. In 2021, Congress went further, enacting a law that presumes all goods produced in Xinjiang are made with forced labor and bans their import outright.

The USTR said its investigation assessed whether each country has formal prohibitions on imports made with forced labor and whether it enforces those prohibitions or otherwise blocks such goods. Countries that do not enforce forced-labor bans, the USTR argued, "burden or restrict US commerce by exposing US producers to unfair competition from forced-labor goods in both export markets and the US market, and by displacing US and other market goods produced without forced labor or forced-labor inputs from their domestic markets into the US and other markets."

In its June 2 statement, the USTR said declining US market share in exports such as tobacco, rice, beef and cotton to countries with evidence of or concerns about forced labor suggests those "US exports may have been adversely affected by competition from forced-labor goods" or that forced-labor products have entered the United States and undercut American businesses.

Bloomberg said both Section 301 probes the USTR has conducted are ultimately aimed at China. The USTR has pursued a two-track investigation into labor practices in goods production — one track focused on forced labor, the other on overproduction. China has sustained economic growth for years by generating exports that far outstrip domestic demand, a model widely attributed to its overproduction-driven, low-cost structure. The overproduction investigation remains ongoing.

China is also among the countries that would be hit hardest if the United States follows through on the tariffs. The roughly 60 targeted countries account for 99.4 percent of all US imports, and Mexico, Canada and China — the top three sources of US imports last year — are projected to absorb the greatest impact, in that order.

Bloomberg projected that Canada and Mexico would face a 10 percent tariff while China would face 12.5 percent. Rates will vary based on several criteria, including whether a country has already reached a trade agreement with the Trump administration. China has signaled it could accept some tariff increases as long as they do not exceed the levels agreed upon at last year's summit talks. If Beijing pushes back, Washington has indicated it could soften the blow through measures such as carveouts for electronics.

Meanwhile, Bloomberg Magazine estimated that the US effective tariff rate currently stands at 10.7 percent when existing global tariffs are factored in, and that additional Section 301 tariffs could push that rate up by roughly 0.5 percentage points.