Experts: US Negotiators Telling Countries Section 301 Rates Could Be Higher Than IEEPA Rates, Could Change Annually

Damond, who was speaking on the Washington International Trade Association's Friday Focus podcast, said Switzer said that Japan, Korea and Taiwan would be in the 15% range, as would Europe, and those tariffs would not be added to existing duties.

"He also said that they are taking a very tough -- [they] kind of implied they're taking a tough approach -- [to] these ARTs [or Trade Reconciliation Agreements]. You know, none of them have been finalized in terms of being signed, sealed, and delivered. And they are going back to countries now during this [Section] 301 process and saying, "Look, you know, your rate could be even higher than the reciprocal rate that we discussed last year.'"

He said for countries that were offered 18% to 20% in reciprocal trade agreement talks, those tariffs would be 30% or 40%, unless they either agree to implement a signed agreement or conclude talks.

"And the other thing they heard him say was that these will be subject to review every year, both in terms of your implementation, but also, if your trade balance doesn't go down, we could raise our tariffs next year."

"'Obviously, folks in Vietnam were a little concerned about some of this," he added. "I think the only good news for them was that maybe China is going to get higher tariffs than they will."

Vietnamese press reports during Switzer's trip to their country quoted Vietnam's prime minister pledging to finalize the trade agreement soon.

The prime minister "affirmed that Vietnam does not have a policy of creating excess capacity, and Vietnamese businesses operate according to market mechanisms. The two economies are complementary and do not directly compete with each other. Vietnamese law strictly prohibits all forms of forced labor. Vietnam actively participates in and implements related international commitments, including conventions of the International Labour Organization (ILO) and free trade agreements," the report said.

"Vietnam is determined to combat and strictly handle violations of intellectual property rights, which is a priority for Vietnam, linked to the innovation of the development model, and the implementation of Resolution 57 on breakthroughs in science and technology development, innovation, and digital transformation."

The Vietnamese press said Switzer said he appreciated the cooperative spirit of Vietnamese negotiators and officials, and that he would make "every effort to reach an agreement soon."

Wendy Cutler, a former top negotiator with Asian countries as a career staffer at USTR, said that putting a higher rate than the reciprocal tariff rate had been before the tariffs were struck down by the Supreme Court also would be legally helpful, since if a country has the same rate they had under the International Emergency Economic Powers Act, it could call into question the legitimacy of the Section 301 investigations.

"So, for example, you could impose, say, on a country a 50% tariff under one of the 301s, but then say, well, we've addressed this in our bilateral agreement. We'll lower it for now, but if you don't implement, then a year from now, we're going to increase it," she said on the podcast.

She also pointed out that it's not at all clear that China would allow its tariff rate to return to 34%, which was the reciprocal rate before the rounds of retaliation began. At the time, the reciprocal rate was in addition to 20% tariffs over fentanyl smuggling. When the trade truce was implemented, the U.S. dropped IEEPA tariffs on China to 20%.

She said China has accepted there will be 20 percentage points of tariffs from this round of Section 301 reports, in addition to the 301 tariffs from the first Trump term.

"I can't see China accepting anything over a 20 percentage point tariff. I think they would view this as a violation of the trade truce, and they would once again threaten access to critical minerals for US suppliers, which just to underscore, there have been some concerns about China even living up to the truce and providing this access to this whole list of critical minerals and magnets."

Cutler also talked about the Board of Trade proposal to cut tariffs on about $30 billion worth of non-sensitive Chinese imports. She said the U.S. would like to have that change ready to announce by the time Chinese President Xi Jinping visits in September.

"A bigger concern of mine is that beyond this tariff-cutting exercise in non-sensitive products, I think the U.S. and China have very different ideas on what this Board of Trade is to do and not do." But even if China expects tariff reductions to spread to more goods, and the U.S. does not have that intention, she said that doesn't necessarily mean the truce will fail.

"Both sides need and want stability for their own reasons," she said, so she thinks it's a strong possibility that there will be trade stability between the U.S. and China over the next year.

Mark Linscott, a former career negotiator specializing in South Asia in the Office of the U.S. Trade Representative, said he believes that the gap between India and the U.S. in negotiating a framework reciprocal trade agreement is not large, and that he hopes it's completed within a month or so.

However, he said, it may take a proposed Section 301 tariff that's high to spur action by India's government.

"India, and perhaps others as well, have been playing a kind of risky game, hoping or thinking that the leverage has shifted when I don't really think it has that much," Linscott said.

Linscott said the U.S. side is willing to push off some sensitive agriculture demands until later negotiations.

He said he believes that "dairy is pretty much off the table" for now, as are genetically modified grains.