President Donald Trump invoked fresh tariffs on a host of U.S. trading partners and challenged a court order on refunds as his administration looks to counter criticism over his handling of the war with Iran and the spike in domestic gas prices that have turned consumers sour in a key election year.
Trump’s Office of the U.S. Trade Representative (USTR) late Tuesday proposed 10% to 12.5% tariffs following a Section 301 investigation into more than 60 trading partners focused on their alleged ties to forced labor.
The U.S. proposed 10% tariffs on countries including Canada, the European Union and Indonesia that either have forced labor-protections or some protections under recent trade agreements. It also proposed 12.5% tariffs on roughly 45 other countries, including China, India, Japan and South Korea, with the tariffs set to take effect after public hearings on July 7.
“The failure of our most important trading partners to address the importation of goods made with forced labor is unacceptable. This creates a dynamic where American workers are forced to compete globally on an unlevel playing field,” said USTR Ambassador Jamieson Greer. “We will no longer tolerate this disparity.”
The U.S. also appealed an order from the Court of International Trade, which called for the refunding of $166 billion in so-called universal tariffs that were ruled illegal by the Supreme Court earlier this year.
Further levies could be unveiled in the coming days as the Trump administration wraps up another investigation under Section 301 of the Trade Act related to excess capacity, although it remains unclear whether they will be stand-alone tariffs or stacked onto the duties announced late Tuesday.
The moves to revive Trump’s tariff agenda—which was first announced in April of last year and triggered a 10% decline for the S&P 500—comes amid one of the strongest market rallies in decades.
The benchmark has gained around 20% since its late-March nadir, with a 30% gain for the tech-focused Nasdaq, and hit a series of record highs amid its longest daily winning streak in a year.
Further gains on Wednesday would bring the longest daily rally since 1995, while a weekly advance would mark the 10th consecutive gain—the longest since 1985.
Those gains, however—and the steady advance in domestic GDP data and the broader labor market—haven’t helped the president’s approval rating, which hit the lowest of either his first or second term in office earlier this week, according to data from Economist/YouGov.
Nor has it supported the Republicans’ election effort—the party trails in polls to maintain control of the House of Representatives in November but holds a narrow lead over Democrats to hold its Senate majority.
Trump could be tempted to switch focus from the war in Iran —where the two sides have remained entrenched since establishing a fragile truce in early April—to offset headlines tied to faster inflation, falling consumer sentiment, and the conflict’s broader unpopularity.
But he’s also playing with “house money” in terms of both the recent market gains, which include one of the best stretches of back-to-back monthly gains since the World War II, and a tech-led boost to the domestic economy, which is growing at a 3% clip in the second quarter.
Moreover, the labor market is defying predictions of AI-related gloom, with job openings pegged at the highest levels in nearly two years last month and bets on modest but steady gains for the May employment report later this week.
Focusing on tariffs, however, could be a risky proposition—especially given the current inflation dynamics, in which price increases are nearing 4% a year, and the massive increase in gasoline prices that have stretched America’s finances just as AI threatens their job security.
That said, the president has gambled, and won, many times in the past and tariffs have rarely hurt his standing among loyal Republican supporters.
This time, however, stock markets might be the final arbiter. And with big new listings on the way—including a $2 trillion flotation of Elon Musk’s SpaceX next week—and the tech-led rally that has defined the spring’s gains starting to look vulnerable, the risks this time around are much larger.
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