Beijing demands Washington fully remove its new forced labor tariffs, invoking a 20 percent cap it says was promised in bilateral talks, yet stops short of retaliation with a leaders’ summit on the horizon.
Peacock Tariff Consulting | US Trade Desk | July 27, 2026
WASHINGTON, July 27. China called on the United States on Monday to dismantle the sweeping new Section 301 tariffs that took effect at the end of last week, escalating a war of words over duties that Washington says punish 60 economies for failing to keep goods made with forced labor out of their markets. The demand, issued by a spokesperson for China’s Ministry of Commerce in Beijing, is the most detailed response yet from the country hit hardest by the new tariff architecture, and it landed just three days after the duties began applying to virtually all US imports.
The ministry urged Washington to “correct its wrong practices” and fully remove what it called unilateral tariff measures imposed “under the pretext of so-called forced labor,” according to a statement carried by the official Xinhua news agency. The spokesperson described the action as “a typical act of unilateralism and protectionism, which China firmly opposes,” and said Beijing “reserves the right to take all necessary measures” while it monitors and assesses subsequent American moves.
Yet for all the rhetorical heat, the statement was notable for what it did not contain. There was no announcement of counter-tariffs, no export control action, and no threat to walk away from the bilateral consultation framework the two governments have maintained through more than a year of tariff turbulence. Instead, the ministry said China remains willing to continue dialogue with the United States “on the basis of mutual respect, equality and mutual benefit,” and expressed hope that both sides would keep implementing the consensus reached in their economic and trade consultations.
A 12.5 percent duty, and a 20 percent ceiling
The new duties are the final action in an unprecedented set of Section 301 investigations that the Office of the United States Trade Representative opened on March 12 at President Trump’s direction. USTR announced the outcome on July 23, and the tariffs took effect at 12:01 a.m. Eastern Time on July 24. They apply to the products of 60 investigated economies, a group that covers, by one widely cited estimate reported by Yahoo Finance, about 99.4 percent of everything the United States imports.
The rate each economy pays depends on how far it has gone toward banning imports of forced labor goods itself. Seventeen economies that maintain such a ban, committed to one in an Agreement on Reciprocal Trade with Washington, or operate a partial regime pay a flat 10 percent. The European Union and Taiwan qualify for 10 percent applied net of a product’s most favored nation duty, while Japan, South Korea and Switzerland receive the same net-of-MFN treatment at 12.5 percent. The remaining 38 economies, China among them, pay a flat 12.5 percent, according to an analysis of the 431 page Federal Register notice published by the Global Trade Alert, a Swiss trade policy monitor.
Crucially for Chinese exporters, the new 12.5 percent duty does not replace the earlier rounds of Section 301 tariffs that already apply to Chinese goods. The Global Trade Alert analysis notes that the forced labor duty applies in addition to the existing China-specific Section 301 tariffs, meaning many products from China now carry several layers of additional duties on top of their normal tariff rate.
That layering is precisely where Beijing believes Washington has crossed a line. In Monday’s statement, the commerce ministry disclosed what it characterized as a specific American commitment made during bilateral economic and trade consultations: that any tariffs introduced to replace invalidated or expired measures on Chinese goods would not exceed 20 percent. The spokesperson noted that the replacement tariffs currently stand at 12.5 percent, and that China’s own countermeasures against the first round of US fentanyl-related tariffs and so-called reciprocal tariffs remain in effect. The arithmetic matters. By publicly setting out the 20 percent ceiling, Beijing is signaling that it will treat any future escalation beyond that level as a breach of negotiated understandings, while implicitly acknowledging that the current 12.5 percent rate sits within the agreed band.
Replacing a tariff wall the courts tore down
The forced labor tariffs are best understood as the third act in a legal drama that began when the US Supreme Court struck down the administration’s original global tariff program earlier this year. That program, built on the International Emergency Economic Powers Act, had imposed so-called reciprocal tariffs on most of the world. When the court invalidated it in February, the administration turned to Section 122 of the Trade Act of 1974, which allows temporary import surcharges of up to 15 percent for balance of payments purposes but only for 150 days without congressional extension.
The Section 122 surcharge of 10 percent expired on July 24, the same day the forced labor tariffs took effect. The choreography was deliberate. As NBC News reported, the new duties were set to land as the temporary measures lapsed, restoring a tariff wall around the American market without interruption. Section 301, unlike Section 122, carries no statutory expiration date, and unlike IEEPA it has survived decades of legal challenge as a foundation for trade action. China’s commerce ministry acknowledged this reality directly on Monday, noting that Washington had reiterated its intention to use Section 301 duties as the replacement for both the invalidated IEEPA tariffs and the expired import surcharge.
The investigations themselves moved at remarkable speed by Section 301 standards. After the March 12 initiation, USTR and the interagency Section 301 Committee held public hearings on April 28 and 29, consulted with more than 45 of the governments under investigation, and reached affirmative determinations on June 2 that the failure of all 60 economies to impose and effectively enforce forced labor import bans was unreasonable and burdened US commerce. A proposed action followed, drawing over 1,600 written comments, and USTR heard from more than 100 witnesses at hearings held July 7 through July 9. Across the full arc of the investigations, the agency says it processed more than 2,100 public comments.
Washington’s moral framing
Ambassador Jamieson Greer, the US Trade Representative, framed the action as the overdue globalization of a policy the United States has maintained since the 1930s. “President Trump recognizes that decades of moral suasion have not eradicated forced labor from global supply chains,” Greer said in announcing the final action. “The United States has had a forced labor import ban for nearly a century, and rigorously enforces it; it’s well past time for our trading partners to do the same.”
Greer added that the action “will begin to correct what is both a human rights abuse and distortive trade practice to improve the welfare of workers everywhere,” and said he was encouraged by trading partners that had moved quickly to adopt import prohibitions of their own. USTR followed the announcement with a release compiling praise from American steelworkers, manufacturers and farm groups, underscoring the domestic constituency the administration is cultivating for the policy.
Beijing rejects the premise outright. The commerce ministry spokesperson said Monday that China has consistently opposed forced labor, has built what the ministry described as a comprehensive labor law and regulatory framework, and is resolute in preventing and combating forced labor practices. The spokesperson then turned the accusation around, observing that the United States has never ratified the International Labour Organization’s Forced Labour Convention of 1930 and accusing Washington of having “long manipulated” the forced labor issue for trade ends. Chinese state media went further over the weekend, with commentary describing the new tariffs as economic bullying, according to Asia Financial, though the official government response has remained carefully calibrated.
The Section 301 findings against China and the other 59 economies do not allege that the investigated governments themselves use forced labor. The determinations rest instead on the failure of those economies to prohibit imports of goods made with forced labor elsewhere, a distinction that has done little to soften the diplomatic reaction but matters for how governments can respond. An economy that enacts and enforces an import ban has a path, at least in principle, to the lower 10 percent rate, and the notice holds out exemption structures designed to reward movement in that direction.
Monday’s statement fits a pattern Beijing has followed all year: contest the legitimacy of each American action loudly, catalogue it as a grievance for the negotiating table, and avoid steps that would jeopardize the broader accommodation. China’s countermeasures against the fentanyl-related tariffs, imposed early in the current confrontation, remain the principal retaliation Beijing has actually deployed, and the ministry’s decision to mention them on Monday reads as a reminder of capability rather than a prelude to expansion. The spokesperson’s closing lines, calling for both sides to “expand cooperation” and build “a constructive bilateral relationship of strategic stability,” were as conciliatory as the opening demand was blunt.
Why Beijing is holding its fire
Trade analysts see a clear logic in China’s restraint. President Xi Jinping and President Trump are expected to meet at a summit in late September, and Beijing has strong incentives to keep the consultation framework intact and its access to the American market as stable as possible in the run-up. The South China Morning Post reported that the two governments’ hard-won truce, which has held through successive rounds of tariff replacement, remains the organizing fact of the relationship, and Monday’s statement conspicuously reaffirmed China’s willingness to keep talking rather than matching the new duty with fresh countermeasures.
China also retains leverage it has not yet spent. Its existing countermeasures against the fentanyl tariffs and the earlier reciprocal tariffs remain in place, as the ministry pointedly noted, and Beijing has in past disputes reached for export controls on critical minerals, regulatory pressure on American firms operating in China, and targeted procurement shifts. The statement’s language reserving “the right to take all necessary measures” keeps every one of those options on the table without committing to any of them.
The restraint is mutual in one respect. By setting China’s rate at 12.5 percent rather than a punitive outlier, and by folding the country into a global program that treats 38 economies identically, Washington avoided singling Beijing out for uniquely harsh treatment this time. Trivium China, a policy research firm, noted that the new tariffs arrived as part of a broad replacement of expiring measures rather than a China-specific escalation, a structural fact that gives both capitals room to characterize the situation as manageable.
The compliance scramble for importers
For American importers, the weekend was anything but calm. US Customs and Border Protection issued implementation guidance on July 24, the day the duties took effect, instructing filers on the new Chapter 99 tariff headings created by the action. The Federal Register notice adds 101 new Chapter 99 headings and a new US Note 52 to the tariff schedule, the legal machinery through which every exemption operates, according to the Global Trade Alert’s structural analysis. CBP’s guidance, circulated as CSMS message 69326983, requires the Section 301 heading to be reported first in the trade remedy sequence, ahead of Section 122, Section 232 and Section 201 claims, customs law firms advised clients over the weekend.
There is a narrow window of relief for goods already on the water. Merchandise loaded onto a vessel and in transit on its final mode of transport before July 24 escapes the new duty, but only if it is entered for consumption before July 28. That deadline arrives tomorrow, and brokers spent the weekend racing to file entries for qualifying cargo.
The exemption architecture is extensive but demanding. A universal list in Annex II covers 2,120 tariff codes for all 60 economies, though only 863 of those are exempt as entered; a further 541 apply only to goods for civil aircraft use, 700 only to goods for pharmaceutical use, and 16 only to specifically named articles. The universal list grew by 465 codes from the June proposal, with nothing removed, a signal that the comment process moved real product lines off the table. Raw materials whose taxation could choke domestic supply, products that could cause economy-wide disruption, and goods that cannot be produced domestically in sufficient quantity all qualified for carve-outs under the criteria the President directed USTR to apply. Goods qualifying under enumerated Section 232 programs are excluded as well, and a separate amendment adds patented pharmaceutical articles to that exemption from July 31.
Cheers from the mills, anxiety in the aisles
The domestic American reaction has divided along familiar lines. USTR’s compilation of supportive statements gathered steelworkers, manufacturers and farm organizations praising the action as a defense of American workers against competition built on coerced labor. For import-competing industries, the appeal is straightforward: a permanent duty floor under nearly all imported goods raises the price of foreign competition across the board, and does so under a legal authority far harder to challenge than the emergency powers the courts already rejected.
Import-dependent businesses see the same permanence and draw the opposite conclusion. Retailers, consumer electronics firms and food importers spent the first Trump term and the years since arguing that broad tariffs function as a tax on American consumers, and the new program’s near-universal coverage leaves them with few places to run. The 10 percent floor applies even to close allies with clean forced labor records by American standards, and the 12.5 percent tier catches major consumer goods suppliers including China and Vietnam. With the duties taking effect midway through the back-to-school shipping season and ahead of holiday orders, cost planners at major retailers have little time to adjust pricing decisions already in motion.
There is also a quieter change buried in the transition that matters for small importers. The Section 122 surcharge that expired on July 24 had applied a 10 percent charge to postal shipments regardless of origin, and its lapse coincided with an increase in the threshold above which postal shipments must have duties prepaid, which rose to 2,500 dollars, according to the tariff tracking service Zonos. For the small-parcel trade that grew up around e-commerce, the net effect of the handover from Section 122 to Section 301 will vary shipment by shipment, and logistics providers were still updating customer guidance over the weekend.
Economists will argue for months about the net price effect of swapping a 10 percent universal surcharge for a 10 to 12.5 percent Section 301 regime with a long exemption list. The administration’s position is that the exemptions for raw materials, pharmaceuticals and goods unavailable from domestic sources were designed precisely to blunt inflationary pass-through where it would hurt most. Skeptics note that exemption lists are administered, not automatic, and that every carve-out creates a lobbying economy around its boundaries.
The economics of a permanent tariff floor
The macroeconomic significance of the past week is less the 12.5 percent number than the signal of permanence. Section 301 actions do not expire on a statutory clock, and the administration has now migrated its tariff wall from legally fragile and time-limited authorities onto a foundation that has withstood years of litigation. For businesses that had held off on supply chain decisions in the hope that courts or Congress would unwind the tariffs, the message from Washington is that elevated duties are the new baseline, not an emergency measure.
For China-focused importers, the compounding is painful. The 12.5 percent forced labor duty stacks on top of the earlier China-specific Section 301 tariffs, which on many product lines already run to 25 percent or more, as well as any applicable antidumping, countervailing or Section 232 exposure. Importers of Chinese machinery, electronics components and consumer goods now face the choice that has defined the past several years in sharper form: absorb the margin hit, pass it to consumers, or accelerate diversification to economies that carry the 10 percent rate. The gap between the 10 and 12.5 percent tiers is modest on its own, but combined with the legacy China tariffs it widens the relative cost advantage of sourcing from Mexico, India, the United Kingdom and other flat 10 percent jurisdictions.
There is also a new incentive structure for foreign governments embedded in the design. Economies can, in effect, buy their way to the lower tier by enacting and enforcing forced labor import bans, and USTR says it structured additional exemptions for economies including Argentina, Bangladesh, Cambodia, Indonesia and Malaysia partly to encourage them to fulfill commitments in that direction. The notice even directs the creation, where feasible, of tariff rate quotas for Bangladesh, Cambodia, Indonesia and Malaysia tied to their purchases of US cotton and textile inputs, an unusually explicit linkage of tariff relief to procurement of American goods.
What to watch
The next markers are already on the calendar. Tomorrow’s July 28 entry deadline closes the in-transit window. On July 31, the patented pharmaceutical exemption takes effect. Beijing’s promised “full assessment” of subsequent US moves will unfold against preparations for the September summit, and any American action that pushes the effective replacement rate on Chinese goods toward the 20 percent ceiling Beijing disclosed on Monday would test the truce severely.
For now, the world’s two largest economies have settled into a familiar posture: new tariffs on one side, sharp words and strategic patience on the other, and a negotiating channel both insist they want to preserve. Whether that channel produces tariff relief, or merely absorbs the shock of the next escalation, may be decided in September. Until then, American importers are left to master 431 pages of new tariff law, and Chinese exporters to price yet another layer of duty into goods bound for a market neither government seems willing to close.