Why Trump's Forced Labor Penalty Tariffs Will Apply to EU, Australia Wine

President Trump's new 12.5% tariffs will apply to alcohol beverages imported from major U.S. trading partners, including::

• South Korea (Soju)
• Japan (Sake, Japanese Whisky)
• Taiwan (Kavalan Whisky)
• European Union Member States & Switzerland (Note: While subject to the 12.5% tier, EU/Swiss products are governed by specific net-of-MFN and tariff-ceiling provisions detailed in the FRN).
• Latin America & Caribbean:Brazil (Cachaca) — Note: Brazil faces a baseline 12.5% rate under this forced labor action, on top of/reconciled with its separate 25% Section 301 duty that took effect July 22.Argentina & Chile (South American Wine)Dominican Republic, Jamaica, Trinidad & Tobago, Venezuela (Rum)Nicaragua, Costa Rica, El Salvador, Guatemala, Honduras
• Asia-Pacific & Other Regions:China (Baijiu, Beer)India (Indian Single Malts, Rum)Thailand, Vietnam, Malaysia, Philippines, Indonesia (Regional spirits and beers)South Africa (Wine and Brandy)Russia (Vodka)Australia & New Zealand (Wine)

Most, if not all of these are nations that you wouldn/t normally associated with forced labor violations. But in drafting the list, the U.S. Trade Representative looked not only at whether there was forced labor in the country but also at whether the country has laws on its books to prohibit the importation of products produced with forced labor.

If a prohibition on importing products produced with forced labor was in a country's statutes, it qualified for a 10% duty. If that prohibition wasn't in a country's laws, it was assessed a 12.5% duty.

The notice specifically exempts UK whisky, sparing Scotch and Northen Irish whisky from the 12.5% additional rate.

One more technical detail: If a good imported from a country is already a higher rate, the 10% or 12.5% rate is not added onto the higher rate. But if a country's goods are taxed at a lower rate, then it's goods pay either the 10% or 12.5% rate as required.

The USTR says the new levies cover about 99% of U.S. Trade. While the immediate impact of the new tarrifs are expected to be limited, trade experts note a number of other trade actions are in the works.

Administration lawyers think this plan is more defensible than the earlier plan.