US Defends Tariffs on Remote Islands Amid Trade Loophole Concerns

Iruni Kalupahana Jadetimes Staff

I. Kalupahana is a Jadetimes news reporter covering Australia

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Image source: Richard Arculus

The US Commerce Secretary has justified the Biden administration's action in imposing tariffs on imports from certain far flung islands, including the unpopulated Heard and McDonald Islands that have penguins and seals as the only human residents. The move, aimed at filling what officials call "ridiculous loopholes" in the practice of international trade, has drawn attention from across the world and criticism.

Reporting to CBS, Commerce Secretary Howard Lutnick announced the action as a preventive one to stop other countries from utilizing these remote territories to avoid US tariffs through a practice known as transshipment. "If you don't leave anything on the list, the countries that basically arbitrage America ship goods via them to us," Lutnick said. "The President is aware of that, he's tired of it, and he's going to fix that."

The Australian government was taken aback to hear that the US had included the Heard and McDonald Islands an external Australian territory roughly 4,000 km off the mainland in its updated list of tariffed places. The islands, even though they were unoccupied, appeared to have been used in short transshipment segments.

While transshipment is a normal part of international business, organizations such as the Pew Charitable Trusts caution that it might be used to disguise the true origin or nature of the merchandise. Hundreds of millions of dollars' worth of illegally caught seafood, especially tuna, pass through transshipment ports every year in the Pacific, Pew says.

Statistics of trade show that the Heard and McDonald Islands have long exported little to the US. However, in 2022, US import records show $1.4 million in "machinery and electrical" goods from the territory provoking eyebrows in light of its lack of infrastructure or population.

The British Indian Ocean Territory, another distant territory that is mainly utilized for military activities, was also mentioned in the tariff amendment. Though civilian access is restricted, it had exports of more than $414,000 to the US in 2022, based on data from the World Bank.

As the US comes under increasing criticism for its trade policies especially in the wake of a steep drop in the stock market last week officials remain adamant that actions such as these are needed to shield American businesses from manipulation and unfair competition in the global marketplace.