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The US Court of International Trade heard arguments challenging Trump's forced labour tariffs on about 60 economies, the third attempt at a global tariff regime after earlier versions were struck down.
The US Court of International Trade on Wednesday heard arguments in a challenge to Donald Trump's third attempt to impose a global tariffs regime. The same panel of judges previously deemed his earlier attempts illegal, and it is now weighing the legality of the new tariffs.
The case was brought by importers and 25 Democrat-led states against tariffs of 10 to 12.5 per cent imposed in late July. The tariffs cover about 60 economies and 86 countries, with the 27-member European Union treated as a single economy. Australian exports to the US face a 12.5 per cent tariff under the measure. The tariffs were introduced ostensibly because those countries failed to adequately prevent imports of goods made with forced labour.
Administration defends forced labour tariffs
The administration argues, as it must under the legislation used to implement the tariffs, that those failures gave the countries an unfair advantage over US producers and burdens or restricts US commerce. The forced labour tariffs are a transparent attempt to recreate the global tariff regime that the Court of International Trade ruled illegal last May, a judgment the US Supreme Court confirmed in February.
The administration responded to the Supreme Court setback with a temporary replacement using a different section of the US Trade Act, which allows tariffs of up to 15 per cent for a maximum of 150 days in a balance of payments crisis. The US does not have, and with a floating exchange rate cannot have, a balance of payments crisis, so those tariffs were also ruled unlawful by the trade court.
The administration has appealed that decision, but those tariffs have expired and been replaced by the ones now under scrutiny. Section 301 of the Trade Act, which the administration is relying on for the forced labour tariffs, has been tested in courts previously and held up. It has not previously been used, however, to create a blanket global tariff regime.
Section 301 tariffs face legal scrutiny
Another set of Section 301 tariffs is planned for 16 countries over excess manufacturing capacity and production, and remains in the pipeline. The administration's cause has not been helped by public comments from Trump and other officials making clear the forced labour provisions are a device to resurrect the tariff regime the Supreme Court demolished. Treasury Secretary Scott Bessent declared after that decision that rates would go back to exactly where they had been before.
Trump told Fox News the new tariffs were doing the same thing as the ones ruled out by the Supreme Court. Those comments were cited by challengers, who argue the expressed concerns about forced labour are just a pretext for recreating what courts have already deemed illegal.
They also argue the administration failed to satisfy legal requirements for implementing the tariffs, saying that in its haste to replace the interim tariffs it did not adequately follow country-specific processes and analysis required by law. The investigations, consultations, public hearings and analysis of harm to US companies done by 86 countries took about two and a half months.
A lawyer for the challengers argued that if you are going to do it at breakneck speed and try to cover the entire globe, you still have to satisfy the statutory requirements. The administration's lawyer said the US Trade Representative had thoroughly evaluated the prevalence of goods made with forced labour in international commerce.
He said the administration did not need to show with metaphysical certainty that forced labour was a burden on US commerce before imposing the tariffs, and had produced ample evidence. He was questioned by the judges on how forced labour had created unfair competition for US companies and whether the administration's report demonstrated harm had been done.
He also said the government had wide discretion to decide the sorts of foreign practices that would allow Section 301 tariffs to be imposed. The judges could simply deem the latest tariffs illegal, as they did with Trump's earlier attempts. They also raised the possibility of handing the matter back to the US Trade Representative's office with directions to redo the entire process properly. For Trump, a third courtroom loss would be a blow.
Ruling impacts revenue and trade leverage
He has already had to disgorge most of the $US166 billion, or $239 billion, of revenue plus interest raised by his initial Liberation Day tariffs. Depending on the appeal outcome, the administration might also have to refund tens of billions of dollars raised by the interim tariffs. A loss would also undermine the leverage Trump has had in using tariffs and the threat of tariffs to coerce and punish other countries.
While there are other mechanisms for imposing tariffs, which he has used, there is no apparent fourth option to create a global tariff regime. If Trump's tariffs were knocked out it would be a good thing for US companies and consumers, who effectively pay them, and for the US inflation rate. It might also, counterintuitively, be good for the US manufacturing sector.
Manufacturing investment and jobs have shrunk ever since Trump regained office, after peaking in 2024, when Joe Biden was president.
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theage:This story was compiled and edited by the HeadTopics newsroom and HT AI from the reports above.
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