From IEEPA to Section 301: USTR Reimplements Trump’s Global Tariff Regime

Overview

On July 23, 2026, pursuant to Section 301 of the Trade Act of 1974, the Office of the United States Trade Representative (USTR) imposed tariffs on 60 countries due to their alleged failure to impose and effectively enforce bans on the importation of goods produced with forced labor. The new tariffs become effective today, July 24, 2026.

This action takes effect as temporary tariffs imposed under Section 122—which the Trump administration enacted after the US Supreme Court held tariffs imposed under IEEPA to be unconstitutional—are set to expire on July 24, 2026.

Although the administration has stated that the new tariffs cover 99.4% of imports into the United States, the tariffs will not apply to a wide range of goods that have been previously exempt, such as goods subject to Section 232 duties and raw materials that are not readily available domestically. Exemptions, country-specific treatment, tariff rate quotas, and tariff stacking are discussed further below.

Goods that are loaded onto a vessel before July 24, 2026 and entered for consumption or withdrawn from warehousing for consumption in the United States before July 28, 2026 will not be subject to additional duties.

Exemptions, Country-Specific Treatment, and Tariff Stacking

The administration has largely carried forward the exemption and tariff stacking framework imposed under IEEPA tariffs and subsequent Section 122 tariffs. Under the Section 301 forced labor tariffs, the administration announced five broad categories of exemptions:

1. Raw materials where tariffs could create domestic shortages;
2. Products that could cause economy-wide disruption if subject to tariffs;
3. Goods that cannot be produced in sufficient quantities in the US, at reasonable prices, or sourced elsewhere;
4. Products for which tariffs would be ineffective in addressing the forced labor practices at issue in the investigation; and
5. Certain products from economies with which the US has a trade deal or arrangement that will encourage full commitments regarding a forced labor import prohibition.

The product specific list of exemptions published in USTR's preliminary affirmative determination has been modified in accordance with comments received in response to USTR’s request for public input on the tariff rates, exemptions, and other mechanisms proposed in its June 2, 2026 affirmative determination. USTR narrowed proposed exemptions for certain chemicals and chemical products to pharmaceutical applications and added 471 product-specific exclusions negotiated in connection with reciprocal trade agreements. These additions cover a range of products, including certain food and agricultural products, fertilizer and pesticide inputs, wood products, metals and metal inputs, semiconductor manufacturing equipment, pharmaceuticals, and selected apparel and collectible items.

Reciprocal Trade Agreements & Country-Specific Treatment

Countries with which the US has reached reciprocal trade agreements or are in the process of negotiation, and as USTR has determined appropriate, have received a more favorable 10% tariff rate, as compared to the 12.5% tariff rate applied to the majority of the investigated economies. For certain economies that have reached trade agreements with the US, USTR has specified the Section 301 forced labor tariff will function as a cap rather than an additional duty stacked on top of existing most-favored nation ("MFN") rates. The EU and Taiwan are subject to a 10% tariff cap while Japan, Korea, and Switzerland are subject to a 12.5% tariff cap. Practically, if a product's MFN duty rate is at or above the applicable cap, no additional Section 301 forced labor tariff applies. If the MFN rate is below the cap, the Section 301 tariff fills in the gap up to the applicable 10% or 12.5% threshold.

Canada and Mexico have also received the more favorable 10% tariff rate in the midst of the ongoing USCMA review. As under the Section 122 framework, USMCA-compliant goods remain exempt from the Section 301 forced labor tariffs.

Tariff Rate Quotas

USTR is also directed to establish textile tariff-rate quotas (TRQs) for Bangladesh, Cambodia, Indonesia, and Malaysia based on each country's importation of US inputs, with the stated objective of encouraging the use of US cotton and textile goods to reduce reliance on inputs from sources that are likely produced with forced labor. The quotas will remain in place for three years and will permit specified volumes of qualifying textile products to enter the US free from Section 301 forced labor tariffs.

Tariff Stacking

USTR's accompanying fact sheet confirms that products already subject to Section 232 tariffs will remain exempt from the new Section 301 forced labor tariffs, continuing the approach taken under the Section 122 tariff program. Similarly, the Federal Register notice states that products covered by the Section 301 forced labor tariffs will continue to also be subject to antidumping, countervailing, or other duties that apply to those products.

Potential Legal Challenges 

Although legal challenges against the new tariffs are expected, a successful challenge may prove more difficult than challenges to prior iterations of these tariff measures. First, USTR complied with statutory requirements prior to imposing the tariffs, including conducting an investigation, holding public hearings, and receiving more than 2,100 comments from the public. Second, unlike IEEPA, Section 301 explicitly authorizes the imposition of tariffs (by USTR) and has previously been used to do so, including in 2018 when USTR imposed tariffs on China following an investigation into discriminatory trade practices. Moreover, in litigation challenging the Section 301 tariffs on China, the US Court of Appeals for the Federal Circuit rejected certain procedural challenges and upheld USTR’s authority to expand the scope of covered products and modify tariff rates. The US Supreme Court recently declined to review the case. Accordingly, the statutory basis and procedural record supporting these tariffs may leave them more defensible in court than the prior tariff actions imposed under Section 122 and IEEPA.

Looking Ahead: Upcoming Section 301 Investigation into Excess Capacity

USTR is separately investigating structural excess capacity and overproduction in key manufacturing sectors involving China, the EU, Singapore, Switzerland, Norway, Indonesia, Malaysia, Cambodia, Thailand, Korea, Vietnam, Taiwan, Bangladesh, Mexico, Japan, and India. The first round of comments and hearings has concluded, but USTR has not yet released a preliminary finding.

If the investigation follows a process similar to the one used in the forced labor proceedings, USTR will likely issue a preliminary determination (including a proposed remedy), solicit an additional round of comments and hearings, and then release its final determination. At this stage, it is not clear what these tariffs will look like and how they would interact with the proposed forced labor tariffs, particularly for overlapping countries.

Steptoe's International Trade team is closely monitoring ongoing tariff developments. If you need support evaluating what these developments mean for your business, our team is ready to help.