(Not So) Fun Fact: National average gas prices are around $4 a gallon, which remains virtually unchanged from a week ago but represents a more than 30-percent increase from last year.

Third Time’s the Charm: Section 301 Tariffs

What’s Happening: On July 24, the Trump Administration imposed Section 301 tariffs on 86 countries representing over 99 percent of all U.S. imports. These tariffs range from 10–12.5 percent and went into effect to replace the 10-percent Section 122 tariffs that expired on the same day. Market reactions have been rather insignificant due to the fact the overall tariff impact remains relatively equal to the Section 122 regime and markets had months to prepare. The Section 301 investigations were first initiated in March 2026 with the stated intent of examining countries’ practices regarding the importation of products made with forced labor. A report and proposed actions were then released in early June, which gave impacted governments, businesses, and individuals time to file public comments. Based on the now final action, the Trump Administration took these comments into consideration by expanding the number of tariff exemptions to include more products and providing country-specific product exemptions to honor any trade deals struck by President Trump. Despite the slightly softer economic impact than the June proposals, some U.S. trade partners have criticized the new wave of tariffs, claiming they maintain adequate mechanisms to address forced labor concerns or vowing retaliation. Additionally, two small businesses sued the administration a few hours after Section 301 tariffs were imposed, marking yet another legal battle surrounding presidential tariff authority.

Why It Matters: After months of anticipation, President Trump’s third – and likely final – tariff regime has arrived and will primarily rely on a combination of Section 301 tariffs and Section 232 national security tariffs. The newly imposed Section 301 forced labor tariffs will impact around $1 trillion in imports, which is lower than both the Section 122 regime and the initial proposal for these specific 301s. The Shipment estimates that the forced labor Section 301 tariff will cost U.S. businesses and consumers between $53–$55 billion annually, down from its original cost estimate of about $58 billion. There are a few reasons for this lower estimate. First, the Trump Administration incorporated additional exemptions for all impacted countries, reducing the total number of imports subject to tariffs. Second, the administration introduced product exemptions on a country-by-country basis in response to comments from impacted parties and due to prior trade deal commitments. These exemptions include raw materials that cannot be produced sufficiently within the United States. Exempting these products gives these countries an incentive to follow through on commitments to combat forced labor practices; hitting them with tariffs would take that incentive away. Third, countries such as Honduras, India, Sri Lanka, Jordan, and Trinidad and Tobago imposed (or committed to impose) forced labor import prohibitions which dropped their tariff rate from 12.5–10 percent. Finally, countries that have struck a trade deal with the Trump Administration have uniquely calculated rates that depend on the most-favored nation (MFN) tariff rates already in place. For example, rather than the European Union (EU) facing a 10-percent Section 301 on top of pre-existing MFN rates, the MFN and Section 301 rates will total 10 percent if the MFN is below that threshold. If a pre-existing MFN tariff is already greater than or equal to 10 percent, then the Section 301 tariff rate will be 0. This aspect of the forced labor Section 301 tariffs reduces some of the economic impact while also allowing the administration to maintain previously established tariff caps from past trade deals.

Other recent Section 301 tariff estimates include the Tax Foundation’s conventional revenue estimate of $58.2 billion in 2027, the Tax Policy Center’s estimate of $55.7 billion in 2027, and the Committee for a Responsible Federal Budget’s estimate of about $90 billion annually over the next decade. Each of these estimates – including the Shipment’s – assumes the forced labor tariffs stay in place for the foreseeable future. As the Trump Administration’s track record proves, there is no guarantee the new Section 301 regime will remain in place long term. The Supreme Court ruled the president’s International Emergency Economic Powers Act (IEEPA) tariff regime was illegal, and the Section 122 tariffs may suffer a similar fate once current legal challenges reach higher courts. While Section 301 has far greater precedence, this has not stopped legal challenges arguing that the United States Trade Representative did not properly investigate each country. The challenges to the forced labor tariffs will rely on the fact that the administration initiated a Section 301 action encompassing a historic 60 simultaneous investigations rather than targeting just one economy. Additionally, lawsuits will focus on the fact that Section 301 is intended to replace illegal tariffs rather than combat forced labor practices, something the president and his trade team have repeatedly stated.

Looking Ahead: By September 1, the Section 301 relating to forced labor will implement 3-year tariff-rate quotas (TRQs) on certain textile and apparel imports for Bangladesh, Cambodia, Indonesia, and Malaysia. These TRQs – which will allow for a certain number of imports to enter free from tariffs – will further reduce the overall economic impact and will apply based on that country’s importation of U.S. inputs. Despite this brief reprieve for future textile imports, the administration’s new 301 regime is showing no signs of slowing down, as multiple ongoing investigations are likely to result in additional tariffs. The largest of these is the Section 301 investigation into excess capacity, which may raise tariff rates on more than a dozen of the largest U.S. trade partners. In terms of the legal battle over Section 301, it is too early to tell what might happen. It is clear, however, that the administration preemptively planned for court cases by including a section on “severability” within the White House memo. The section attempts to reinforce the notion that each investigated economy faces a separate 301 tariff, meaning if one tariff action is struck down in court this decision does not necessarily apply across the board.

In Other News

New Tariff Threats: Last week, President Trump issued more tariff threats against the EU, Canada, and Mexico, signaling that the Trump Administration’s third tariff regime may slowly approach rates last seen under IEEPA. In response to the European Union fining Google $1 billion for purported antitrust violations, the president stated on Truth Social that the administration would immediately initiate a Section 301 investigation into the practice of “ROBBING” U.S. companies. This follows multiple other high-profile EU fines of U.S. companies such as Apple, Meta, and Amazon, which the Trump Administration has been critical of in the past. Details regarding whether this Section 301 will apply only to the EU and what specific foreign practices will be investigated have yet to be released. President Trump also noted in a press conference that tariffs may be imposed to retaliate against Canada for wildfire smoke and against Mexico for lettuce tied to foodborne illness outbreaks. It is unclear what authorities would be used for these tariffs or if these are simply empty threats that will never come to fruition.

Congress Steps Up: Last week, Senator Wyden introduced a bill to restrict the president’s ability to impose tariffs in an attempt to rebuild congressional authority over taxes and trade. If passed, the bill would be a significant step in limiting the executive branch’s tariff powers and put Congress back in the driver’s seat, a role Congress has slowly delegated to the president over many decades. This bill – titled the Congressional Trade Powers Reform Act of 2026 – would fully eliminate Sections 122 and 338 tariff authorities and would require congressional approval before Section 232, 301, or 201 tariffs are implemented. Furthermore, the bill would create the “Joint Committee on Tariffs and Trade,” comprising five members from the Senate Finance Committee and five from the House Ways and Means Committee, which would review any tariffs the president proposes. This joint committee would then decide whether or not to recommend the president’s proposal to Congress for a vote.