The next tariff tempest is brewing, with the Office of the United States Trade Representative (USTR) announcing Section 301 investigations into more than a dozen U.S. trading partners in a bid to keep President Donald Trump’s duty-driven trade strategy afloat.
On Wednesday evening, the federal government’s trade arm initiated investigations into China, the European Union, Singapore, Switzerland, Norway, Indonesia, Malaysia, Cambodia, Thailand, South Korea, Vietnam, Taiwan, Bangladesh, Mexico, Japan and India related to structural excess capacity and production in manufacturing sectors.
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“The United States will no longer sacrifice its industrial base to other countries that may be exporting their problems with excess capacity and production to us. Today’s investigations underscore President Trump’s commitment to reshore critical supply chains and create good-paying jobs for American workers across our manufacturing sectors,” USTR Ambassador Jamieson Greer said in a statement.
According to Greer, the Trump administration’s efforts to spur a domestic manufacturing resurgence have been undermined by production surpluses perpetuated by economies that do business with the United States.
“Across numerous sectors, many U.S. trading partners are producing more goods than they can consume domestically,” he said. “This overproduction displaces existing U.S. domestic production or prevents investment and expansion in U.S. manufacturing production that otherwise would have been brought online.”
Many American industries have seen their own capabilities evaporate as they fall behind foreign competitors, he added. The USTR wrote in the Federal Register notice that much of the bloated global production in question relies on non-market-based practices and government subsidies for a leg up, and excess exports often make their way to the U.S. market, creating “large or persistent trade surpluses.”
The notice pointed to sectors like aluminum, automobiles, batteries, cement, chemicals, electronics, energy goods, glass, machine tools, machinery, non-ferrous metals, paper, plastics, processed food and beverages, robotics, satellites, semiconductors, ships, solar modules, steel and transportation equipment as areas of concern.
It also highlighted the apparel and footwear manufacturing activities of China and Vietnam as specifically problematic, along with excess textile production capacity of Indonesia, Bangladesh and India.
Greer said that a second Section 301 investigation into about 60 countries for forced labor would be launched on Thursday.
Joshua Kagan, special counsel at the Washington law firm Kelley Drye & Warren and a former Biden-era assistant U.S. trade representative, told Sourcing Journal that he had expected a “horizontal” application of Section 301, meaning that rather than opening investigations, requesting public comment and issuing tariffs one country at a time, the Trump administration would bundle dozens by issue.
Forced labor—which, like excess manufacturing capacity, falls under the statute’s unfair trade practices provision—made for an obvious candidate, he said.
“Forced labor import prohibitions are a clear U.S. negotiating objective and addressing forced labor has broad, bipartisan support,” Kagan said.
The United States has long maintained that China’s government has trafficked Uyghur Muslims and other ethnic and religious minorities into labor camps in the Xinjiang region, for example, and President Joe Biden signed the Uyghur Forced Labor Prevention Act into law after it passed through Congress with near-unanimous support.
“I think we are going to have a future world where far more countries have forced labor import prohibitions,” he added. “Whether the U.S. will use economic leverage to ensure that those are actually enforced, whether we will have global reiterations of [Customs and Border Protection’s Withhold Release Orders] under Section 307, and whether the U.S. government provides [Bureau of International Labor Affairs] funding to build forced labor import prohibition capacity among trading partners are all open questions from my standpoint.”
Both investigations could be wrapped up by July, neatly backfilling the 10 percent tariffs levied by Trump hours after the Supreme Court nailed the coffin shut on his International Emergency Economic Powers Act (IEEPA) duties. Greer said Wednesday that he hoped to see the investigation concluded and remedies proposed before the Section 122 tariffs reach their 150-day expiration date.
As such, the timeline for the investigations is aggressive. On March 17, the USTR will open the dockets for written comments and requests to appear at hearings, which are due by April 15. The Section 301 Committee will convene public hearings on May 5 through May 8, and seven days later, post-hearing rebuttal comments are due.
With the launch of the Section 301 probes, which aren’t explicitly capped at any specific rate, the trade landscape is about to shift dramatically again. Section 122 doesn’t allow variability across countries or industries—hence the blanket 10 percent rate for everyone. According to Kagan, Section 301 could allow the administration to restore rates to IEEPA levels (or close) and create negotiating space for bilateral deals that let the United States extract the trade concessions it wants.
The White House has only finalized agreements on reciprocal tariffs, or ARTS, with eight nations, including Argentina, Bangladesh, Cambodia and Taiwan. Framework agreements with the likes of Ecuador, India, the European Union and Japan are still awaiting translation into full ARTS.
“I suspect the aim is to have varying rates on a country-by-country basis, as in IEEPA, both to dissuade acts, policies, and practices that the U.S. government finds to violate the statute and to generate potential bilateral negotiating leverage,” Kagan said. “I don’t know if they would be the same as the IEEPA rates, but from a negotiating standpoint, the U.S. would need to explain to trading partners why the new rates diverge from the IEEPA rates if they are seeking to use them as a point of persuasion.”
Nevertheless, applying Section 301 this way is unprecedented, he noted. And whenever something pushes against the limits of statutory interpretation, there are bound to be challenges. Kagan suspects the Trump administration will carve out exceptions from a potential Section 301 blitz, likely sparing United States-Mexico-Canada Agreement partners and Section 232 targets, just as IEEPA and Section 122 did.
“With IEEPA being taken away, they’ve lost a lot of leverage, and they’re trying to regenerate that,” Matt Priest, CEO and president of the Footwear Distributors and Retailers of America (FDRA), said of the Trump administration going on the Section 301 offensive.
The trade association lead noted that the timing of investigations into certain economies is no coincidence. Turning up the heat on China weeks ahead of a meeting in Beijing between Trump and Chinese President Xi Jinping and targeting the EU, which recently put its reciprocal trade agreement with the U.S. “on ice,” are almost certainly calculated attempts to exert control over negotiations.
These actions may also serve as a signal to other trading partners that haven’t yet hashed out ARTs with the United States, and a “litmus test” for countries seeking trade deals.
“It sets a stage, in particular, with the developing countries… If they’re at the table for an agreement on reciprocal trade, I suspect the administration is trying to create leverage to continue to push those agreements through,” he said. Trading partners might seek to slash tariffs on U.S. imports or lower other barriers to trade in the interest of avoiding the harshest consequences of the Section 301 investigations, Priest believes.
Greer on Thursday told reporters that nations engaged in negotiations with the United States should move forward in finalizing them, though he refrained from claiming they’d be spared from any Section 301 tariffs.
With the administration’s goal of reprising the IEEPA duties all but explicitly stated, Priest believes the investigations will be less about fact-finding and more about seeking confirmation.
“I think a lot of the ‘investigative’ part in their minds is probably just checking the boxes on process; a lot of their concerns have been well documented,” he said.
“I don’t want to say the outcomes are totally baked, but at the same time, they just released the annual review of trade barriers that U.S. companies face last week, and that’s kind of the playbook,” he added. The president pointed to the USTR’s yearly report, which covers 60 countries and about a dozen factors, like government laws, regulations and non-market policies that undermine fair global competition, during his “Liberation Day” announcement last year.
“I think they know what they want to go after,” Priest said of the Trump administration. “I don’t think there’s going to be a whole lot of Sherlock Holmes activity, trying to dig up the latest concern. I think they know why they’re concerned, and it’s just a matter of going through the process of public comments.”