Leibowitz: From pig iron to tech, Section 301 threatens another trade shakeup

Early this month, United States Trade Representative (USTR) found Brazil’s practices damaging to US commerce and proposed 25% tariffs on all imports from Brazil with extensive exemptions. Pig iron from Brazil was not on the exemption list.

Side note: US steel mills, especially EAF mills, are dependent on Brazil for pig iron. Will the administration listen to steel mills? It would not be a surprise. (We saw a roughly similar situation play out last summer.)

Another important development: Digital services taxes have been a point of contention between the US and especially (but not exclusively) the European Union. During the first Trump administration, tariffs on French wine were threatened but were never imposed. (Dieu merci!) Nevertheless, several European countries have imposed digital services taxes (DSTs) that primarily impact US tech companies because of their size (Apple, Microsoft, Google, Open AI, etc.).

On Friday, President Trump dramatically turned up the heat by threatening “any country” imposing digital services taxes with 100% tariffs on all exports to the US. Thus, a product-specific retaliation (such as against wine or luxury goods) would be replaced with economy-wide tariffs against any country maintaining or adopting a DST. If imposed, it would represent the broadest retaliatory tariff actions ever proposed in response to foreign tax policy.

Section 301: The connection between pig iron and DSTs

These two administration initiatives (and others on pharma pricing and Brazilian trade practices) justify broad tariffs based on Section 301 authority to impose economy-wide tariffs. Both are legally questionable. But lawsuits will probably have to wait until the tariffs are actually imposed.

The DST tariffs are the most speculative because there is no current Section 301 investigation on DSTs. Moreover, imposing 100% tariffs would effectively preclude any narrower deals with countries that have DSTs—such as France, Austria, and Turkey. They would also make such trade remedies as antidumping, countervailing duties, Section 232 tariffs, and safeguard measures superfluous against those countries.

The president’s June 26 announcement threatening 100% tariffs on countries imposing DSTs did not cite legal authority. And no such authority is apparent in the absence of a Section 301 investigation.

The broader Section 301 question is whether there is any legal requirement to relate the proposed penalty (100% tariffs on all imports) to the damage to US commerce. There is substance to the administration’s claim that DSTs fall primarily on US tech companies. They are the largest players in that market.

But based on 2025 import statistics, the value of imports from countries that maintain a DST is about $400 billion. A 100% tariff on $400 billion of goods would essentially wipe out that amount. Some could be shifted to other countries. But that relocation would be traumatic and would cripple retailers and US manufacturers relying on foreign suppliers. The likelihood that domestic producers could make up for the trade disruption is slight, especially in the near term. Substantial investments to fill that gap depend on reasonable certainty that the tariffs will remain in effect. That, in turn, requires domestic consensus, including from Congress. The administration does not appear willing to achieve such consensus. All in all, not an encouraging outlook.

The big picture: What will replace the old order Trump wants to destroy?

The bottom line is that the Trump administration will attempt to impose tariffs wherever possible and remove them only if court decisions compel it to do so.

The reason for all these initiatives is likely to provide increased leverage for negotiations. For example, one of the pending Section 301 investigations concerns pharmaceutical pricing overseas. American consumers foot most of the bill for pharma research because foreign countries tend to strictly control pricing in their domestic markets. Trump is the first president to treat this problem seriously. Tariff threats that lead to agreements on pharma pricing could improve the balancing of burdens internationally.

If threats like these are to improve US leverage, they must be credible. Here is where the threatened 100% tariffs fall short—they are not credible. The cost to the US economy would be much too great. The other Section 301 proceedings seem more likely to result in meaningful discussions.

As all these initiatives unfold, one is left with the feeling that disruption of the global order is their primary purpose. As the old order is destroyed, it is time to think carefully about what will take its place. Unfortunately, there are no proposals that replace the old order with something markedly better. Working on that better outcome would be noble indeed.