Trump’s Tariff Sham

With the Iran war a failure on all fronts, Trump predictably has tried to change the subject yet again. His abrupt imposition of tariffs on some 60 nations generated the desired headlines. But every aspect of Trump’s new tariffs is a fraud, from the professed justification to the supposed economic benefit.

Trump then turned to Section 122 of the Trade Act of 1974, which allows tariffs to offset chronic balance of payments deficits. But that provision has a hard limit of 150 days, which expired yesterday.

So Trump’s U.S. Trade Representative, Jamieson Greer, came up with yet another provision, Section 301 of the Trade Act, which authorizes investigations of unfair trade practices and allows retaliatory tariffs. Buried in Section 301 is a provision, which appropriately enough originated in the Depression-deepening Smoot-Hawley Act of 1930, authorizing tariffs against nations that use forced labor in their exports. 

The Supreme Court held last February that Trump’s earlier round of tariffs under the 1977 International Emergency Economic Powers Act was an illicit use of executive power. There was no economic emergency, and Trump’s own words and actions made clear that the purpose was impulsive punishment of nations whose leaders had annoyed him. 

Greer then launched an investigation of 60 nations, representing more than 99 percent of U.S. imports, to troll for possible practices that could be construed as forced labor.  His investigation began on May 12. Miraculously, in less than three weeks, Greer’s office found all 60 guilty of permitting forced labor. His report, released on June 2, concluded, “All of the investigated economies have failed both to impose a legal prohibition on the importation of goods produced wholly or in part with forced labor (forced labor goods) and to effectively enforce such a prohibition.”

The report even included countries such as Norway, which have been among the world’s leaders in combating forced labor and slave labor. By Greer’s test, the United States, with its use of prison labor and forced labor in ICE detention camps, as well as its failure to enforce the Uyghur Forced Labor Prevention Act, should be on the blacklist.

Greer’s “investigation,” of course, was a sham, designed solely to give Trump a pretext for a new round of tariffs. These tariffs will be challenged in court. Eventually, the Supreme Court is likely to disallow them on the same grounds that it overruled Trump’s earlier use of the International Emergency Economic Powers Act, as an extra-legal executive power grab based on fake evidence and an abuse of what is permitted by law.

Read: The tariff refund nightmare

One bizarre aspect of Trump’s new tariffs is the escalation of his conflict with Canada. The headlines screamed that the tariffs on Canada would be raised to 50 percent. The fine print disclosed that they would affect just 2 percent of Canadian exports to the U.S.

Even these tariffs violate the U.S.-Canada-Mexico trade agreement—which Trump has criticized and threatened not to renew, but has not yet officially renounced—so these tariffs are also illegal under domestic and international law. There are a few genuine sources of trade friction between the U.S. and Canada, such as dairy exports, lumber, and auto parts. Canadian Prime Minister Mark Carney has offered to negotiate on these and other issues. Trump, true to form, is not after real negotiations, but headlines.

The one legitimate purpose of selective trade barriers, which the Biden administration pursued, is as part of a coherent set of industrial policies intended to reshore supply chains and key industries. But, as Jared Bernstein has documented, Trump’s scattershot tariffs, combined with his wreckage of industrial policies, have achieved none of this.

Trump is also attracted to tariffs because they raise revenue, at a time when his tax cuts and military buildup are deepening the current deficit and long-term national debt. A preposterous op-ed in The New York Times by Josh Lipsky claimed that tariffs could be such a prodigious source of revenue that they could significantly reduce the national debt and reassure the bond market, thus making tariffs irresistible. But the numbers don’t show that.

Between April 2, 2025, when Trump imposed his “Liberation Day” tariffs, and February 20, 2026, when the high court struck them down, the tariffs produced about $240 billion in revenue, not chump change but only about 4 percent of federal revenue. And of that money has been or will be refunded.

The new tariffs, mostly between 10 and 12.5 percent, replaced the old global tariff of 10 percent, which lapsed yesterday. In other words, not much difference. 

And a tariff is a tax. Studies of the last round of tariffs show that importers pass along about 90 percent of the cost of tariffs to consumers. 

With Trump, you never know whether one branch of his administration talks to another. If Greer at the Trade Representative talks to Trump’s Council of Economic Advisers, he and Trump might appreciate that the economy is on the verge of a serious downturn due to the economic impact of the Iran war, rising interest rates, and increased evidence of a stock market bubble and the risk of a crash. In these circumstances, the last thing the economy needs is higher taxes on consumers.

Maybe these are idle worries. With Trump, you never know when his whims will shift or what last-minute deal he might make to claim success in saving the world from his own policies, generating new headlines.