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On July 23, 2026, the Office of the U.S. Trade Representative (USTR) announced it would begin imposing across-the-board tariffs of 10.0–12.5 percent on 60 of the United States’ trading partners under Section 301 of the Trade Act of 1974, as the result of these countries’ insufficient efforts to block the importation of goods made using forced labor. As helpfully explained by Global Trade Alert, the specific tariff amount and whether or not the tariffs stack on top of other tariffs varies by trading partner. Regardless, the overall effect is the same: The United States is moving back toward a high-tariff scheme unseen since the 1930s.
Within hours, small businesses that would be affected by the tariffs filed a lawsuit attempting to block implementation. A group of 25 U.S. states soon followed with their own lawsuit. They all could well have been buoyed by the fact that the Supreme Court in April ruled against the Trump administration’s sweeping tariff scheme imposed last year under the International Economic Emergency Powers Act (IEEPA). However, Section 301 is an entirely independent law. To understand the impact of the latest tariffs, it is important to assess the likely legal durability of this tariff decision, as well as assess the broader strategy being pursued by the Trump administration. It is equally important to consider how any new tariffs could affect efforts by the United States and other trading partners to blunt the challenge from China’s non-market practices, which are fueling a growing wave of exports. In 2025, China recorded a global trade surplus in goods of over $1.2 trillion and growing imbalances with the European Union, Southeast Asia, and elsewhere. By initial indications, it is on a path to surpass these levels in 2026.
Our analysis suggests that the Trump administration’s move to reimpose high tariffs faces some serious risks, especially if care is not taken to meet the relevant statute’s requirements. The legal foundation of the latest Section 301 decision is not rock solid, but more broadly, a variety of other obstacles loom to using these tariffs effectively to make the American economy more globally competitive and to blunt China’s aggressive trading practices.
Using Section 301 to impose tariffs is not novel; the Trump administration has been using the statute quite frequently, going back to the Section 301 case against China during President Trump’s first term, which resulted in major tariffs on imports from China starting in 2018 (see Table 1). Unlike IEEPA, the Section 301 statute explicitly authorizes the imposition of tariffs, although a statutory process must be followed. However, courts, to date, have consistently upheld use of Section 301. For example, importers challenged the Chinese Section 301 tariffs from the first Trump administration in court, largely based on procedural deficiencies and one question about the permissible scope of tariff modifications, but the challengers ultimately did not succeed in having the courts overturn the tariffs.
That said, the forced-labor Section 301 investigation has some unique features that make it potentially vulnerable to a court challenge on different grounds. First, some have objected to what they see as a fundamental misuse of Section 301, which they say Congress intended as a rifle shot statute to combat a set of unfair practices by an individual trading partner. They argue that a Section 301 determination imposing a uniform set of tariffs across 97–99 percent of U.S. imports clashes directly with the Constitution, which gave Congress the exclusive responsibility to impose these kinds of broad tariffs. Even if the statute could be read to authorize this sweeping action, it would be an impermissible delegation of congressional responsibility. Others argue that the imposition of relatively uniform low tariffs on almost all trade demonstrates that the effort is not meant to attack an unreasonable trading practice so it can be eliminated, but is instead aimed at increasing tariffs for other reasons, therefore qualifying as a misuse of Section 301. It remains to be seen what the courts will conclude on these issues. The U.S. government could well argue that the congressional delegation is consistent with the foreign relations powers of the executive branch, that the USTR made individual country determinations required by the statute, and that there is nothing in the statute that limits the amount of international trade that can be disciplined.
If the government gets past these overarching objections to its action, it still could face additional challenges to the determination here. The Section 301 statute requires the U.S. government to determine that a foreign government act, policy, or practice is unreasonable and that it burdens or restricts U.S. commerce. By statute, this determination must be based on both the consultations with the affected trading partner and the investigation, which in this case included both a hearing and submissions from interested parties. The determination has to be published and paired with a description of the facts on which it is based. The action the USTR takes is to be directed at obtaining the elimination of the problematic act, policy, or practice.
The Section 301 statute explicitly defines as unreasonable “a persistent pattern of conduct that permits any form of forced or compulsory labor.” However, the determination has to be based on facts. The courts will be reluctant to second guess executive branch decisions in the foreign policy space, but they have the power to assess whether the agency examined the relevant information and gave a reasonable explanation for its decision. The courts can overturn the determination if they find it to be arbitrary, capricious, or an abuse of discretion.
Commentators have pointed out several weaknesses in this determination that a court could find important. The record on many trading partners is cursory, at best, especially regarding enforcement. It contains no actual evidence that the partner is permitting forced labor. Further, there is a question about the quality and quantity of evidence showing that many trading partners’ policies are actually burdening U.S. commerce.
However, it is not clear how a court challenge on these grounds will turn out. The “arbitrary and capricious” standard required to overturn the determination is a high bar. But the unprecedented scope of the tariffs and the limited evidence provided for the sweeping determinations do raise new, unique questions that a court will have to grapple with seriously.
Another Section 301 investigation, this one regarding manufacturing overcapacity in 16 large U.S. trading partners, including China, is also in progress. If this investigation produces tariffs on other trading partners anywhere close to those imposed on China, or the resulting tariffs mimic the levels of the discarded IEEPA tariffs, basic questions will arise that could trigger a court challenge. In addition, China is expecting no more than a 7.5 percent tariff, given the apparent agreement between Presidents Trump and Xi last October in Busan (and reaffirmed at their May 2026 meeting in Beijing) to limit new tariffs to no more than a cumulative 20 percent. However, a credible analysis of the tariff levels needed to respond to China’s excess capacity could easily far exceed 7.5 percent.
It is possible that the USTR will provide serious calculations of the damage to U.S. commerce, but it will suspend a certain percentage of the tariffs if trading partners, including China, enter into agreements with the United States such as the agreements on reciprocal trade (ARTs) already negotiated during the IEEPA tariff period. That could shield the U.S. government from the courts, since Section 301 specifically contemplates the possibility of government-to-government agreements as a means to try to resolve Section 301 complaints. As discussed below, these agreements also could provide some defense against Chinese imports in the longer term.
The Trump administration has justified its high-tariff approach by arguing that aggressively raising tariffs would yield a wide range of economic and security benefits for the United States. Unfortunately, none of these benefits has yet been realized.
Although the United States took in a lot more tariff revenue in 2025 than in years past as a result of higher tariffs (see Figure 1), the Supreme Court’s ruling against the IEEPA tariffs means that most of those revenues are in the processing of being returned to those who paid, which in the large majority of cases were American firms and individuals. Even if the revenue had been retained, the cut in other corporate and individual taxes was of a larger magnitude. Taken together with a substantial expansion in expenditures, the U.S. federal government’s overall debt picture has worsened, rising from roughly $36 trillion at the start of the Trump administration to over $39 trillion today.
Further, while the trade deficit with China has shrunk, the deficit with others has grown even further, leaving the United States with no reduction in its overall trade deficit. The persistence of the overall deficit, as opposed to a shift in its geographic distribution, is a product of the U.S. economy’s overall imbalances, with consumption far higher than savings and investment. Although there has been an announcement of some major new manufacturing investments, the net trend is still a decline in manufacturing employment in absolute terms, and manufacturing still represents a declining share of the overall economy.
On top of this, the tariffs have contributed to growing prices and uncertainty. The Yale Budget Lab estimates that the high U.S. tariffs will cost each American household roughly $1,100.
The high-tariff strategy has borne some limited fruit with regard to China, but not on issues that are the most salient to the U.S. economy. According to the U.S. Commerce Department, the bilateral trade deficit in goods dropped from $297.1 billion in 2024 to $202.7 billion in 2025. And in first five months of 2026, the deficit has dropped another 43.0 percent compared to the same period a year ago.
That said, the drop in the bilateral goods deficit does not equal a genuine gain for the U.S. economy. The fall includes not only a drop in imports but also in U.S. exports, which fell a whopping 35.2 percent from 2024 to 2025 and another 1.1 percent in the first five months of 2026. Equally important, the drop in imports is more artificial than real, as China is getting around these tariffs through expanded trade and investment links with others, particularly in Southeast Asia. It is not clear how much of this shift in trading patterns constitutes outright transshipments or circumvention and how much involves some degree of processing and value added in these countries before the final goods are sent on to the United States.
Moreover, although the United States has just added 12.5 percent to China’s tariffs and will likely add more tariffs once the investigation into manufacturing overcapacity is completed, part of the trade ceasefire reached in Busan last October, as mentioned above, the Trump administration promised a 20 percent ceiling on new China tariffs. Following this latest Section 301 case, that leaves only another 7.5 percent in space available. Further, based on their agreement at the Beijing summit, the United States and China are currently in discussions over reducing tariffs, potentially down to Most-Favored Nation (MFN) levels, for $30 billion worth of goods in each direction and a potentially larger amount following the upcoming summit in Washington in September. (This would be more than a superficial gesture, as this would apply, based on 2025 trading levels, to 28.3 percent of U.S. exports to China and 9.7 percent of Chinese exports to the United States.) Given these arrangements and the possibility that U.S. tariffs on other trading partners are going to continue to rise once the investigations on manufacturing overcapacity and various other sectors are completed, the tariff gap between China and others seems unlikely to widen significantly, if it does at all. In that event, all of this activity may end up being more empty posturing than anything else.
One potential strategy the United States may be carrying out to defend against China’s non-market economic behavior is to initially impose high tariffs on everyone and modestly scale back some tariffs on China, but then offer major tariff reductions to other trading partners in exchange for key commitments. For example, the partners would take action to effectively block transshipments from China and fully align with U.S. export controls toward China. In such a scenario, the United States would keep its word toward China but, by offering better terms to other trading partners, effectively outmaneuver—and isolate—China. Some of these types of commitments are contained in the ARTs that the United States has signed with several trading partners.
If true, this is a risky way to go about trying to find alignment. Other trading partners are now deeply skeptical of the Trump administration’s interest in working with others negatively impacted by Chinese trading practices, and they are upset by the Section 301 case that found they have failed to stop forced labor imports. They see these various tariffs as part of an overall protectionist drift in U.S. trade policy, not an intermediate step toward a trade environment that will eventually have enhanced free trade with lower barriers, or the creation of a safe space for free-market economies where China’s non-market practices cannot do damage. Moreover, many trading partners see the stabilization of U.S.-China ties, capped by summitry and business deals, as being hypocritical, given that Washington has criticized others, such as Spain, Australia, and the United Kingdom, for similarly seeking to deescalate tensions with China.
If the Section 301 tariffs on unforced labor and manufacturing overcapacity go through as planned, many trading partners may tolerate the new baseline tariff environment. That said, they would certainly like to minimize those baselines. The Trump administration has pointed out that high tariffs and market access threats have moved trading partners to fix problems, both commercial and otherwise, that have irked the United States for decades, and so it will not drop this tool lightly, even if trading partners, courts, or Congress push back.
That said, a much greater awareness of mutual self-interest among the United States and its allies must emerge for them to act in concert to effectively combat China’s non-market practices. That means agreeing on how to prioritize the China challenge above other issues, as well as offering greater economic opportunities for commerce among one another. If the United States continues with a protectionist strategy against everyone, other like-minded trading partners, already alienated, may well decide not to deal with the United States any more than absolutely necessary. And that would mean losing any real chance to counter China’s distortive behavior that is affecting the global economy.
Scott Kennedy is senior adviser and Trustee Chair in Chinese Business and Economics at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Claire Reade is senior associate (non-resident) with the Trustee Chair in Chinese Business and Economics at CSIS.
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