ST Explains: What does Trump’s new tariff on ‘forced labour’ mean for Singapore trade?

SINGAPORE – Four months after losing his sweeping reciprocal tariffs to a court decision, US President Donald Trump has made his first move to replace them with trade levies he believes are less vulnerable to legal challenges.

On June 2, Trump’s trade office in Washington issued a comprehensive 98-page report proposing double-digit tariffs on 60 countries – which represent about 99 per cent of all US imports – after an investigation initiated on March 12 showed they were not doing enough to restrict trade in goods produced by “forced labour”.

The Office of the US Trade Representative (USTR) placed trading partners into two groups, depending on what it considered varying degrees of ineffective enforcement of rules on trade in “forced labour goods” and whether they had already struck a trade deal with the Trump administration.

The USTR said it would impose tariffs at the rate of 10 per cent on imports from Canada, the European Union, the UK, Indonesia, Mexico, Pakistan, Argentina, Bangladesh, Cambodia, El Salvador, Guatemala, Malaysia and Taiwan.

The remaining 45 countries, which include Singapore, China and India, would face higher duties of 12.5 per cent.

But nothing is settled yet. The tariff rates may change for some countries, including Singapore, as the proposed measure is subject to public comments and hearings before a USTR trade panel. This will start in July and may take weeks, if not months.

There is also at least one more USTR investigation that could lead to another tariff measure – pertaining to excess manufacturing capacity – that remains pending.

Despite the tariff tumult since 2025, Singapore has continued to clock strong growth in exports, thanks to the AI boom and increased trade with partners across Asia.

What has changed

For now, little would change for companies that count the US as an export market if and when the new tax relating to forced labour applies.

The new measure will replace the 10 per cent global tariff – set to expire in late July – imposed soon after the Feb 20 Supreme Court ruling. That would raise the US effective tariff rate by just 0.5 per cent, according to experts.

The effective tariff rate reflects the average tariff paid across all imported goods into a country.

Some of the sectoral exemptions, if not all, such as those for certain electronics and pharmaceuticals imports into the US, will also continue.

Hence, semiconductor manufacturers and drugmakers in Singapore may have to continue their negotiations with the Trump administration to ensure the waivers apply to their exports. The waivers depend on a host of factors, including their commitment and plans to invest in the US.

The Feb 20 Supreme Court ruling also did not affect other targeted sectoral tariffs. That means the 50 per cent tariff on steel, aluminium and copper, as well as the 25 per cent tariff on foreign-made cars, heavy-duty trucks and engines, will remain in place.

Does the latest move affect the previous court ruling?

The Feb 20 decision declaring tariffs based on the 1977 International Emergency Economic Powers Act (IEEPA) unconstitutional remains effective.

All companies that paid the IEEPA tariffs – totalling about US$166 billion (S$213 billion) – can continue to seek refunds.

In fact, the Supreme Court ruling against IEEPA and a subsequent decision by the US Court of International Trade (CIT) against the temporary 10 per cent global duty in May have set a pattern of judicial scrutiny of Trump’s broad executive tariff-imposing authority.

Hence, legal challenges against the new measure are very much likely.

Is the new tariff legally bulletproof?

The Trump administration has used Section 301 of the Trade Act of 1974 as the legal basis for imposing the new tariff on trade in forced labour goods because it has no statutory expiration date or maximum percentage cap.

Historically, measures imposed under this law have also proven far more resilient against judicial overturns.

While the CIT and the US Court of Appeals for the Federal Circuit have upheld the executive branch’s broad authority under Section 301 in previous cases, experts argue that using the statute as a dragnet to apply blanket universal or multilateral tariffs to dozens of countries stretches the law beyond Congress’ intent.

Section 301 was originally written using singular language to target the unfair trade practices of “a foreign country”.

The US has prohibited the import of goods made with forced labour since 1930.

It has also targeted goods from specific places. For instance, in 2021 the US banned all imports from the Xinjiang region of China on the presumption that they were made with forced labour.

But unlike the 2021 ban, the latest USTR report does not say whether specific nations are actually importing goods made with forced labour, nor does it look at whether products are being made in those countries using forced labour.

USTR only assessed whether a country has a formal ban in place on goods imported using forced labour and whether it is enforcing the ban or attempting to block such imports.

The trade office is simply arguing that if a nation is failing to enforce a ban on forced labour, it burdens or restricts US commerce by subjecting US producers to unfair competition.

Experts anticipate immediate lawsuits once the tariff takes effect.

Is there global pushback?

The proposed forced-labour tariff drew immediate criticism from major economies such as the EU and China.

Countries across Asia, Europe and North America may attempt to drag out the public comment, hearings and review periods.

DBS Bank said in a note on June 4 that the US no longer holds the same economic leverage over its allies as it did in past trade disputes.

“Since Trump 2.0, tariff escalation and geopolitical shocks have reshaped policy priorities, making retaliation increasingly viewed as economic self-preservation rather than a negotiating tactic,” it said.

By targeting 60 economies under a legal rationale that many governments may challenge, Washington risks turning a bilateral pressure strategy into a broader multilateral response, the bank noted.