Forced-labor tariffs face suit as trading partners tighten their laws

Global companies face new supply-chain scrutiny

The Trump administration has used forced-labor concerns to revive global tariffs under Section 301 of the Trade Act of 1974, a move now challenged in court by Democratic officials in more than two dozen states and answered by several U.S. trading partners tightening their own enforcement regimes. The lawsuit tests whether forced-labor findings can serve as the legal basis for tariffs, but analysts said the spotlight on forced labor in supply chains is likely to continue regardless of the court’s decision.

In July, the Trump administration took action against 60 economies it said had failed to adequately address forced labor, accusing those countries of putting competing American workers on an unfair footing. Section 301 of the Trade Act of 1974 lets the president take action against countries it finds have engaged in unfair trade practices. The tariffs followed a February U.S. Supreme Court ruling that struck down the administration’s earlier global tariffs, which had relied on emergency economic powers.

Last week, Democratic attorneys general and governors from more than two dozen states asked a New York-based federal court to invalidate the new tariffs, calling the forced-labor theory a pretext. The White House did not respond to a request for comment on the lawsuit.

Whether or not the court blocks the tariffs, the spotlight on forced labor in supply chains appears unlikely to fade. Several U.S. trading partners have moved to bulk up their own legal regimes and enforcement since the U.S. unveiled its tariffs. Prime Minister Mark Carney’s government proposed a tougher Canadian forced-labor law in June, about a week after USTR filed a preliminary report criticizing the forced-labor records of Canada and other U.S. trading partners. India banned goods with forced-labor connections in July; Colombia followed in late September with its own ban on imports with any forced-labor touchpoint.

“It’s a big issue,” said Luis Lozano, the former president of Toyota’s Mexico unit who now serves as chief executive of Mexico City-based advisory Odysseus Business Intelligence. “There’s more eyes,” Lozano said. “And there’s certain words as a global company you don’t want combined with your brand. One is ‘forced labor.’”

The U.S. has for decades taken a firmer line on forced labor than its peer countries. It first banned imports tied to the practice in 1930. In 2022, the Uyghur Forced Labor Prevention Act came into force, effectively banning the import of any goods that could be tied to Xinjiang over human-rights concerns. Beijing has denied allegations of forced labor and other abuses in the region. As of August, the U.S. had under the UFLPA investigated about 44,000 shipments and denied entry to nearly 27,000, most of them electronics.

Automaker Volkswagen, for example, had a shipment of vehicles kept out of the U.S. in 2024 after the company found a single part traced to Xinjiang. VW said at the time it diligently investigates possible human-rights issues in its supply chains.

Many U.S. allies have had more mixed records on forced labor. The European Union is planning to enforce its forced-labor import ban by December 2027, nearly a century after the first U.S. law was passed. Canada agreed to bar imports of goods made with forced labor as part of a free-trade agreement from Trump’s first term, but as of Oct. 2 had held up just 53 shipments for inspection over forced-labor concerns and blocked two — one of textiles and another of seafood — according to figures provided by the Canada Border Services Agency.

“Regardless of whether one is for or against the tariffs, everyone has to admit that the 301 investigations have ignited conversations about forced labor in supply chains all over the world,” said Laura Murphy, a forced-labor researcher who advised the Biden administration. “In some places where advocates have been arguing for new action for a decade, we are seeing sudden movement,” Murphy said.

The administration’s focus on forced labor is welcome, said Samir Goswami, director of forced-labor programs at Hague-based Global Rights Compliance, which works with governments and international institutions to promote international law. “We just needed to see enforcement through any instrument,” Goswami said.

USTR said in September it had brought 50 countries together for training on imposing and enforcing forced-labor bans. Mexico and Argentina committed on the sidelines of a G-20 meeting last week to work to eliminate forced labor from global supply chains.

Countries around the world are unlikely to reverse their new forced-labor-related policy moves regardless of what the U.S. court decides, said Richard Mojica, head of the customs-and-import-trade practice at the law firm Miller & Chevalier, who advises large international businesses. “Countries that have gone through this are unlikely to wind down any of these laws,” Mojica said.

Companies are also diving much deeper into supply chains as they wrestle with tariffs and increased sanctions, he said. “You have a situation where it becomes important to know the identity of these supply-chain players,” Mojica said. “Not knowing them creates potential liability.”