Trump Trade 2.0: New 301 Tariffs, Increased Tariffs on Canada and Brazil, and Aluminum Incentives

USTR Finalizes Section 301 Tariffs

On July 23, USTR imposed new tariffs on 60 economies for failing to ban and enforce prohibitions on imports made with forced labor. The additional duties took effect at 12:01 a.m. ET on July 24, coinciding with the expiration of the Trump Administration's temporary 10% Section 122 global tariff. The Section 122 tariffs were statutorily limited to 150 days. The action covers the top 60 U.S. trading partners, representing 99.4% of U.S. imports, and followed two rounds of public hearings and more than 2,100 public comments.

The final action largely aligns with the June 2 proposal and applies a two-tier tariff rate, either 10% or 12.5%, at the country level. A 10% rate applies to 17 economies that impose a forced labor import prohibition, have committed to one through an Agreement on Reciprocal Trade, or maintain a partial regime. This category includes Argentina, Bangladesh, Cambodia, Canada, Ecuador, El Salvador, Guatemala, Honduras, India, Indonesia, Jordan, Malaysia, Mexico, Pakistan, Sri Lanka, Trinidad and Tobago, and the United Kingdom. For imports from the European Union and Taiwan, the total U.S. tariff is capped at 10%, and for Japan, Korea, and Switzerland it is capped at 12.5%. In each case the Section 301 duty applies only to bring a product up to that cap, so goods already at or above the cap under the most-favored-nation rate face no additional duty. Imports from other investigated economies, which notably includes China and Vietnam, face a tariff rate of 12.5%. The most significant change from the June 2 proposal to implementation was a tariff reduction on imports from India, which moved from the 12.5% tier to 10% after India approved regulations to prohibit imports made with forced labor.

The new 301 tariffs include some exemptions, including USMCA-qualifying goods from Canada and Mexico, Section 232 steel, aluminum, copper, and automotive articles, pharmaceuticals, civil aircraft, semiconductors, and certain raw materials that lack sufficient domestic quantities. A narrow in-transit exception applies to goods loaded and in transit before 12:01 a.m. ET on July 24 and entered before 12:01 a.m. ET on July 28. Read the USTR fact sheet, White House Presidential Memorandum, Federal Register Notice, and CBP Implementation Guidance (CSMS #69326983) for additional information.

Section 338 Tariffs on Canada

On July 20, President Trump took three separate actions under Section 338 of the Tariff Act of 1930, imposing a 50% tariff rate on imports of Canadian motor vehicles, alcoholic beverages, and dairy. The measures cover nearly $20 billion in imports. This is the first significant modern use of the Section 338, which permits duties of up to 50% to offset a foreign country's discrimination against U.S. commerce. Critically, the tariffs do not take effect immediately. Instead, they go into effect 30 days from issuance, on August 19. This provision allows for its use as a negotiating tool before it goes into effect.

Each proclamation targets a sector where the Administration alleges discrimination against U.S. goods. On motor vehicles, USTR cites Canada's 25% tariff on non-originating vehicle content up to 85% of vehicle value and tariff-rate quotas it says cut Canadian imports of U.S. vehicles by 22%, or $5.6 billion, over the past year. On alcohol, the Administration points to provincial liquor boards that pulled U.S. products from shelves, and on dairy it argues Canada grants the European Union broader access under than it allows U.S. retailers.

The choice of authority is notable. Section 338 tariffs do not require an investigation by the Department of Commerce or USTR, a comment period, or a hearing, so the safeguards present in Sections 232 and 301 are absent, and affected companies have no administrative exclusion process as of this writing. The duties stack on existing tariffs and apply even to USMCA-qualifying goods, though Section 232 products, energy, potash, fish, and critical minerals are excluded. Canada is separately subject to the new 10% Section 301 forced labor duty. See the fact sheet here.

Section 301 Tariffs on Brazil

On July 15, USTR took action in its Section 301 investigation of Brazil, imposing a 25% tariff on most Brazilian goods effective July 22 under new HTSUS subheading 9903.05.01. The yearlong investigation concluded that Brazilian regulations covering digital trade and electronic payments, preferential tariffs, anti-corruption backsliding, intellectual property, ethanol market access, and illegal deforestation are unreasonable and burden U.S. commerce. The action is the first major country-specific Section 301 tariff issued since the Supreme Court invalidated the Administration's IEEPA-based tariffs in February.

The action preserves broad exemptions for coffee, beef, orange juice, civil aircraft and parts, pharmaceuticals, energy products, and goods already subject to Section 232 duties, and includes a narrow in-transit exception for ocean shipments loaded before July 22 and entered before July 29. The Brazil tariff does not stack with Section 232 duties, but some Brazilian products are subject to both the 25% Section 301 tariff and the 12.5% forced labor duty, for a combined rate of 37.5%.

USTR maintains that it remains open to continued negotiations. Brazilian President Lula called the decision to impose new tariffs "a lamentable milestone.”

Aluminum Onshoring Incentive Plan

On July 20, President Trump signed a proclamation directing the Secretary of Commerce to establish an incentive program for companies investing in U.S. primary aluminum production.

Under the program, companies may submit onshoring plans to build new U.S. aluminum smelters, expand existing facilities, or refurbish outdated ones. Companies with approved plans become eligible to import primary aluminum at half the otherwise applicable Section 232 rate, (25% against the current 50%) in a volume commensurate with the expected annual production of the U.S. facility. Projects must break ground before January 20, 2029 to qualify, and for refurbishments the benefit is capped at the value of the investment. The Commerce Department will monitor and enforce compliance and may halt or rescind the tariff benefit, including retroactively, if a company fails to meet its commitments.

The Administration highlights the significant gap between U.S. primary aluminum demand and domestic smelting capacity as the rationale for the program. The incentive program departs from the exclusion-request model that has governed Section 232 relief to date, giving companies reduced-rate import supply while domestic capacity is built. The Department of Commerce is expected to issue implementation details in the coming weeks.

The Michael Best legal and government relations teams are well-positioned to assist companies in navigating tariff and trade policy, the CBP refund process, and CIT litigation. Please contact Sarah Helton (sarah.helton@michaelbest.com) or Jeffrey Dunn (jsdunn@michaelbest.com) if you are interested.

Are you concerned about the impacts of the outlined trade issues? Please contact Sarah Helton, Michael Best Strategies’ Trade Practice Lead at sarah.helton@michaelbest.com for assistance.