It has been a long road for President Donald Trump as he looks for a justification to erect a tariff wall around the US, including against key allies.
From the opioid crisis to illegal migration, then the need to bring manufacturing back to America’s shores, the list goes on.
Through Trump’s second term, there has been a new justification almost every month for the trade levies he is seeking to place on allies.
Some have been overturned by the courts, others by economics and some even by their own logic. And so, Trump has now turned to effectively accusing dozens of trade partners of trading in goods that have been produced using forced labour.
These are “tariffs in search of an authority”, as one industry figure put it. The forced labour line shores up President Trump’s tariffs against a challenge from Congress or the courts.
In practice, the levies are curiously similar by country to a previous round of tariffs imposed supposedly for completely different reasons.
The good news for the UK is that the regime effectively remains the same as before.
What has changed is that our nearest neighbours in the European Union now have a much better deal than before, and in turn are in a better situation than the UK.
While the UK and the EU each appear to have a 10% rate, the EU’s is a flat rate, while the UK’s will apply alongside other tariffs, in a range of goods including footwear and textiles.
The government has struck effective side deals on medicines, steel, aluminium, cars and, with the help of King Charles, whisky.
At the end of this process however the overall trade-weighted effective tariff rate for the EU (8.5%) could end up a bit lower than the UK’s (6.8%).
It should not matter that much, but the help given by doing the first deal, and by post-Brexit trade freedoms, looks to have been short-lived.
The British Chambers of Commerce trade expert William Bain points to the competitive advantage for EU exporters into the US in some sectors.
The EU has secured better treatment because it has passed a ban on forced labour goods, which the UK has not.
This is not an accusation on the use of forced labour in supply chains. It is about the passing of specific legislation, mirroring the US ban on products that have used forced labour in supply chains.
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There should be scope for a better deal for the UK, but it raises an interesting question about whether the government will pursue an EU-style ban. This is widely seen as a backdoor way to target China, in particular for conditions in its Xinjiang province.
Last October, external the government said it “remained firmly opposed to the use of state-imposed forced labour”, but that it was “considering how best to reflect this position,” citing “operational and legal complexities”.
Since then, the UK has welcomed imports of Chinese cars, and is exploring a services trade deal with the country. The relationship with China has been a balancing act for the government.
This is also one of the global stories of the tariff wars. As the US repeatedly changes its rationale for tariffs, the rest of the world is focused on trading with each other. For example, Canada increased its trade with the rest of the world by more than it lost from the US.
China’s total dollar trade with the US is flat in the first half of this year versus last year. Across the world it is up 21%, including 14% with the EU, 11% with the UK, and 24% with Africa.
There could be pressure now to legislate for a formal ban on forced labour products. Successive governments have opted for a lighter voluntary due diligence regime.
Will the US force a change in the UK and elsewhere, and what might it offer in return?
Or the UK may opt to keep its precarious geopolitical position by sticking to its existing deals in medicines, metals and cars.
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