Stiglitz says Trump's forced-labor tariff rationale is a ruse

Stiglitz urges EU to impose reciprocal tariffs on US prison-labor goods

Stiglitz wrote that Trump is “increasing and decreasing tariffs willy-nilly,” violating international agreements he signed and “almost surely violating federal law.” The new tariffs followed an administration “investigation” into other countries’ supposed failure to police labor abuses, he wrote, and came after the Supreme Court struck down Trump’s earlier tariff authority. The administration had imposed 150-day temporary tariffs that were “already deemed illegal by the courts but still under appeal even as they expired in late July,” Stiglitz wrote.

Stiglitz argued that the forced-labor concern is contradicted by the tariffs’ pattern. The new duties closely track earlier ones imposed on the basis of trade balances, he wrote, asking whether bilateral trade deficits “just so happen to be highly correlated with the use of forced labour.” The administration is right that too little is being done about forced labor, he wrote, “but its stated concern is a ruse.”

China, “long a suspected source of goods produced with forced labour, has largely been given a pass,” Stiglitz wrote. He attributed this to China’s “control of rare earths and critical minerals,” writing that China “can slap Trump down whenever it wants.” Stiglitz described a recurring pattern: “When another country has the means and the willingness to fight back, Trump always chickens out (TACO).”

If Trump were genuinely concerned about forced labor, Stiglitz wrote, he would address it domestically. The 13th Amendment’s exception clause — permitting involuntary servitude “as a punishment for crime whereof the party shall have been duly convicted” — has enabled extensive prison labor, Stiglitz wrote. The US has 5% of the world’s population but accounts for a quarter of its prisoners, he wrote, and fewer than a quarter of states forbid forced labor. Stiglitz cited a study by Michael Poyker that he described as one of the most thorough examinations of forced labor in the US, finding that nearly 1.4 million US prisoners were employed in 2005, with roughly 600,000 working in manufacturing — 4.2% of the total manufacturing workforce at the time. When Trump “wantonly slapped tariffs on the rest of the world” last year describing them as “reciprocal,” Stiglitz wrote, true reciprocity “would call for high tariffs on products made in US states that still exploit prison labour.”

Stiglitz wrote that the tariffs against the EU are “especially hard to justify” because a 2024 EU law — the Corporate Sustainability Due Diligence Directive — already banned imports of goods produced with forced labor, including those made by subcontractors. He recalled that Commerce Secretary Howard Lutnick previously called the EU law an “unnecessary negative burden” on American companies, saying the US was prepared to consider “all conceivable trade tools.”

Stiglitz urged the EU to “call out this hypocrisy and not capitulate” and to impose reciprocal tariffs on goods from US states that use prison labor most extensively. He wrote that the list of companies reportedly using prison labor in their supply chains includes Burger King, Cargill, and Walmart. If Trump’s actions prompt the EU to investigate forced labor in the US, “it will be doing US workers a service,” Stiglitz wrote, adding that “hardly anyone in the EU has made a peep about the issue” beyond “a sigh of relief that Europe wasn’t hit harder.”

Stiglitz wrote that Trump invoked a provision of the Smoot-Hawley Tariff Act of 1930 to justify new tariffs on Canada, claiming authority to respond to discriminatory tariffs. But Canada imposed its tariffs in retaliation for Trump’s discriminatory tariffs, Stiglitz wrote, and the entire WTO system is based on nondiscrimination — “a principle that Trump’s tariff policies have flagrantly defied.”

Stiglitz wrote that tariffs are “just a distortionary tax” on American consumers and US competitiveness, and that tariff wars have not led to reshoring of manufacturing. US manufacturing jobs have declined by 75,000 since Trump’s second inauguration, after rising under President Joe Biden, he wrote, and the US goods trade deficit increased during Trump’s second term, reaching a record $1.24 trillion in nominal terms. FRED data available Aug. 3 put net US exports of goods and services at minus $869 billion. Multilateral trade deficits depend less on tariffs than on macroeconomic variables such as domestic national savings, Stiglitz argued, writing that Trump’s fiscal deficits have undermined that metric.

Stiglitz wrote that Trump “is subverting international law in an effort to seize a larger share of the value embedded in global supply chains, and harming the US economy in the process.” He wrote that Trump “gets away with his bullying because too many people, at home and abroad, have capitulated to him” and concluded that “Trump is just like any other authoritarian leader: he needs to be feared.”