By Lina Irawan 
One such workaround will take effect later this month, when the Trump administration imposes 25% tariffs on many imports from Brazil. The fresh tariffs, announced this week, arrived after the Office of the U.S. Trade Representative (USTR) concluded a yearlong investigation under Section 301 of the Trade Act of 1974 that determined Brazil had engaged in unfair trade practices detrimental to American commerce. This move reignites a contentious trade relationship with the South American giant, following previous punitive measures based on differing rationales.
The latest action revives a battle the Trump administration has waged specifically against Brazil since last year, when the White House imposed tariffs totaling 50% on certain Brazilian imports. Those earlier duties were levied after Brazil’s former president, Jair Bolsonaro, was accused of leading a conspiracy to overturn his reelection loss in 2022. Bolsonaro was later sentenced to 27 years in prison for his role in the alleged coup attempt, a development that saw the U.S. administration link trade penalties to issues of democratic stability and rule of law in a departure from conventional trade dispute grounds. The new 25% tariffs, however, are distinct, rooted in allegations of economic malfeasance rather than political instability, targeting specific sectors of the Brazilian economy deemed to benefit from unfair advantages. While the USTR’s official statement did not detail the specific "unfair trade practices," typical Section 301 investigations often examine areas such as intellectual property theft, forced technology transfer, subsidies for domestic industries, currency manipulation, or non-tariff barriers that restrict market access for U.S. goods and services. Brazil, a major agricultural and industrial exporter, has frequently been scrutinized for its domestic support programs and trade policies affecting global markets for commodities like steel, aluminum, and various agricultural products.
Still, the administration’s actions against Brazil may also be the beginning of an alternate plan to implement tariffs in line with the President’s wishes despite the questionable effectiveness of such duties so far, experts say. This strategic shift from broad, emergency-based tariffs to targeted, investigation-driven measures reflects an adaptation to judicial constraints and a desire to solidify the legal standing of future trade barriers.
Tariff Disappointment and the Search for Durable Tools
Since the Supreme Court ruled in February that Trump could not use the International Emergency Economic Powers Act (IEEPA) to impose tariffs for economic rather than genuine national security emergencies, importers have been issued about $71 billion in refunds, according to the U.S. Treasury’s monthly statement. With $166 billion in refunds set to be paid out in total—a colossal sum representing a significant reversal of anticipated government revenue—and domestic manufacturing having increased a measly 1.1% year-over-year as of June, Trump’s tariffs are turning out to be more of a drag than a boon for government revenues, said James Knightley, ING’s chief international economist.
"The hope was tariffs were going to be a big revenue raiser, and right now it appears that actually tariffs are going to be potentially a loser through the second half of this year," Knightley told Fortune. He emphasized that the administrative burden and financial drain of these refunds, combined with the lack of a substantial manufacturing renaissance, undermine the core arguments initially presented for the tariffs. The minimal manufacturing growth, often overshadowed by broader economic trends and supply chain disruptions, raises questions about the direct efficacy of tariffs in achieving industrial revitalization. Many economists argue that while tariffs might offer short-term protection to specific industries, they often lead to higher input costs for other domestic manufacturers, retaliatory tariffs from trading partners, and increased consumer prices, ultimately offsetting any perceived benefits.
It’s these very lackluster results thus far that may motivate the administration to push even harder to implement its tariffs, Knightley added. The political imperative to demonstrate decisive action on trade, especially in the face of judicial setbacks, appears to be a driving force. Just after the Supreme Court struck down many of Trump’s IEEPA-based tariffs in February, he implemented a temporary 10% global import surcharge citing Section 122 of the Trade Act of 1974. However, this measure, intended as a stopgap, lasts only 150 days and is set to expire later this month, underscoring the administration’s urgent need for a more permanent and legally defensible framework for its protectionist agenda. Section 122 allows for temporary surcharges or other import restrictions to address balance of payments issues or to retaliate against unfair foreign trade practices, but its short duration limits its long-term strategic value.
The administration is now taking a slower but potentially more lasting approach: investigating countries’ trade practices under Section 301 of the Trade Act of 1974, like it did with Brazil. This method, while more time-consuming, offers a robust legal foundation. Section 301 allows the U.S. to take action, including imposing tariffs, against foreign countries that violate trade agreements or engage in unjustifiable, unreasonable, or discriminatory acts that burden or restrict U.S. commerce. The process typically involves a formal investigation by the USTR, often lasting up to a year, which includes public hearings, opportunities for stakeholders to submit comments, and detailed economic analysis to ascertain harm to U.S. industries.
Trump successfully used this approach several times during his first stint in office, most notably to impose 25% tariffs on roughly $250 billion worth of Chinese imports. Although challenged by various industry groups and even at the World Trade Organization, Trump’s tariffs on China using this method were not struck down by U.S. courts, demonstrating the legal resilience of Section 301. This success provides a blueprint for the current administration to pursue its trade objectives within established legal boundaries.
Once an investigation is completed and findings of unfair practices are confirmed, the tariff rates can also be adjusted without restarting the entire arduous process, Melissa Irmen, the director of advocacy for the National Association of Foreign-Trade Zones, told Fortune. "If you set the tariff at say 15% and it’s deemed that it needs to be modified, then changing it to 30% isn’t the same involved process," she said, highlighting the flexibility and adaptability of Section 301 once initial grounds are established. This allows the administration to calibrate its trade pressure based on ongoing negotiations or evolving economic conditions.
The administration has already proposed tariffs on dozens of other trading partners, including the European Union, following investigations into their enforcement of bans on goods made with forced labor. This broadening scope suggests that Brazil is only the first of many economies to be affected by fresh tariffs under this re-energized Section 301 strategy. The forced labor issue introduces a moral and human rights dimension to trade policy, potentially garnering broader public and political support, even if it complicates global supply chains and increases costs for businesses.
Business Effects and the Shadow of Uncertainty
That doesn’t mean the new duties will be immune from lawsuits. Irmen said lawsuits could look to argue the administration failed to adequately prove a foreign practice harmed the U.S. economy. They could also question whether tariffs would genuinely remedy the alleged harm, rather than simply punishing foreign producers and raising costs for American consumers and businesses. Legal challenges often hinge on the evidentiary basis of the USTR’s findings and whether the chosen remedies are proportional and effective.
Regardless, importers are tired of the uncertainty. After the rapid tariff implementations under IEEPA imposed last year, companies had to scramble to comply, often absorbing unexpected costs, renegotiating contracts, or seeking alternative suppliers. Just like last time, businesses could once again pay duties for months or years, only to again seek refunds if courts ultimately strike them down, creating a cycle of financial instability and administrative burden.
"We may have the same situation where tariffs are implemented, tariffs are collected for a period of time, and by the time the court decision happens, if it does go the way IEEPA went, we may have to see another refund process again," Irmen said, expressing a common sentiment of exasperation within the business community. The prospect of repeated refund processes not only ties up significant capital but also adds layers of complexity to financial planning and risk management.
While longer investigations under Section 301 may give businesses more time to prepare and adjust their supply chains, many will still be left wondering what countries or products Trump will target next, throwing a wrench into their long-term planning. This unpredictability creates a chilling effect on investment and expansion. "Uncertainty is just not a good thing in any kind of business planning," Irmen reiterated, underscoring the fundamental need for stability in international trade for businesses to thrive.
More tariffs could also raise prices for consumers and make it harder for the Federal Reserve to lower interest rates, Knightley added, which would affect businesses overall. Tariffs act as a tax on imports, increasing the cost of goods and services, which can feed into inflationary pressures. This dynamic creates a direct conflict with the Federal Reserve’s mandate to maintain price stability, potentially compelling the central bank to keep interest rates higher for longer to combat tariff-induced inflation, thereby dampening economic growth and increasing borrowing costs for businesses and consumers alike.
Still, Trump will likely trudge ahead with his tariff plan—even as he has repeatedly insisted the Fed lower rates—because trade policy could soon become one of the only tools left in his arsenal to implement his economic agenda. His consistent calls for lower interest rates clash directly with the inflationary impact of his trade policies, a paradox that highlights the complex interplay between fiscal, monetary, and trade policies.
Some polls have predicted Democrats may win the House and split the Senate following the midterms. If Republicans lose control of Congress and Trump struggles to pass laws that further his agenda, he may rely even more heavily on his executive power, said Knightley. The presidency inherently possesses significant authority in foreign policy and international trade, often bypassing the need for Congressional approval, particularly when invoking specific statutes like Section 301.
"If you can’t do tax and spending, you’re going to be more limited to areas where the president has executive powers," he said. "And trade, of course, is one of those." This strategic reliance on executive actions in trade policy underscores a broader trend in American politics, where presidents increasingly utilize unilateral powers to circumvent legislative gridlock. As the administration faces mounting judicial and economic challenges to its trade agenda, the pivot to Section 301 represents a calculated move to establish a more enduring framework for its protectionist ambitions, potentially reshaping global trade relations for years to come.
