In US President Donald Trump’s third attempt to broaden taxes on US imports, the administration imposed a new 10% to 12.5% tariff on 60 of its important trading partners on the 24th of July 2026. The US Supreme Court struck down the first tariff round imposed in April of 2025, in February of this year, which for certain economies exceeded 50%. This was then replaced by a temporary 150-day 10% global tariff under Section 122 of the Trade Act of 1974, which expired in late July. Once those duties lapsed on July 24, the administration imposed new tariffs of 10% or 12.5% under a different provision of the trade law.
The new 10-12.5% tariff. How does it work?
The newly implemented tariffs are based on claims that key trading partners have failed to properly tackle forced labour and are therefore implemented to “punish countries for not doing enough” to reduce forced labour. Consequently, 60 countries, including the UK, China, the European Union, and Canada, will face a tariff ranging from 10% to 12.5% based on the gravity of the claim.
However, US trade expert Caroline Freund said the move is “not about forced labour” but that Trump is simply “looking for a legal reason to put the tariffs in“. The latest tariffs fall under Section 301 of the Trade Act of 1974, which had been used sparingly before Trump’s presidency. This allows the president to impose tariffs if the US Trade Representative has conducted the required investigations and found sufficient evidence of unfair labour practices that affect American commerce. According to Alan Wolff, a senior fellow at the Peterson Institute for International Economics and the former deputy director-general of the World Trade Organization, it is very likely that these latest tariffs will once again be challenged in court.
How will US consumers and importers be affected?
The new duty applies to nearly 99.4% of US imports; however, economists say that the Section 301 duties are less likely to affect inflation and consumer finances, given the relatively lower tariff levels compared to the previous year, which likely already pushed prices up and contributed to inflation. According to Angelo Kourkafas, senior investment strategist at Edward Jones, “the new tariffs are broadly consistent with the previous tariff levels that expired and should not trigger another round of rises in goods prices”. At the same time, a number of importers have already filed lawsuits after the tariffs took effect, arguing they revived a tariff regime the Supreme Court had already struck down.
How other countries have reacted?
The UK government said firms are not likely to face a change in tariffs, given its previously agreed rates around the 10% level. However, a government spokesperson said that matters regarding forced labour are taken very seriously to “ensure that in global supply chains UK businesses are not complicit” in forced labour participation. Brazil called the 12.5% tariff it is facing “unjustified”, while the Japanese government said it regrets the new tariff. Australian Trade Minister Don Farrell said the levies were “completely unjustified”, while China called the move a “political manipulation”.
What does this mean for Sri Lanka?
Sri Lanka stands in a relatively better position than its initial 44% rate implemented during Liberation Day, which was then adjusted down to 30% and later to 20% after a few rounds of negotiations, before finally settling at the temporary 10% global rate. According to the Office of the United States Trade Representative (USTR), Sri Lanka qualified for the lower 10% as it had either adopted/partially implemented, or committed to enforcing, restrictions on imports linked to forced labour. This followed a gazette issued on the 10th of July 2026 by Sri Lankan President Anura Kumara Dissanayake, which immediately prohibited the importation of goods produced wholly or partially using forced labour. The measure followed warnings that Sri Lankan exports could face a 12.5% tariff. The newly implemented 10% rate, therefore, puts the country on an equal footing with its competing exporting peers, including India, Bangladesh, Indonesia, and Malaysia.