Washington: U.S. President Donald Trump's administration will open a trade inquiry into South Korea, China, Japan, and 13 other economies to uncover "unfair" trade practices related to "structural" excess capacity and production, a move that might result in tariffs, the U.S. Trade Representative (USTR) said Wednesday.
According to Yonhap News Agency, USTR Jamieson Greer announced during a press call that the Trump administration will publish a Federal Register notice initiating an investigation under Section 301 of the 1974 Trade Act. This legal provision allows the USTR to investigate unfair foreign trade practices on a country-by-country basis. The announcement comes as the administration seeks to replace the invalidated country-specific "reciprocal" tariffs that were previously implemented under the International Emergency Economic Powers Act (IEEPA) but struck down by the Supreme Court last month.
The investigation aims to examine acts, policies, and practices of certain economies relating to structural excess capacity and production in manufacturing sectors. Greer stated that the inquiry is expected to uncover various unfair trading practices linked to excess capacity and production. The economies subject to this investigation include South Korea, China, India, Japan, the European Union, Singapore, Switzerland, Norway, Indonesia, Malaysia, Cambodia, Thailand, Vietnam, Taiwan, Bangladesh, and Mexico.
Greer emphasized that the Trump administration believes key trading partners have developed production capacity misaligned with market incentives of domestic and global demand, leading to overproduction, persistent trade surpluses, and underutilized manufacturing capacity. The investigation will focus on economies where evidence of structural excess capacity exists, such as persistent trade surpluses, bilateral surpluses with the United States, or unused and underutilized production capacity.
The investigation will also scrutinize policies promoting production and exports detached from market demand, including subsidies, suppressed domestic wages, non-commercial activities by state-owned enterprises, market barriers impeding foreign exports, inadequate environmental or labor protections, subsidized lending, financial repression, and currency practices.
Greer stated that the investigation is in its initial stage, with the goal of understanding the drivers of structural excess capacity to determine the appropriate response. The investigation process will be public and transparent, with the interagency Section 301 committee holding public hearings and soliciting comments from interested parties. The USTR will open a docket for written submissions and requests to appear at hearings, expected to open around Tuesday, with a submission deadline of April 15. Public hearings are anticipated around May 5, and seven days after the final hearing date, concerned parties will be able to submit rebuttal comments.
After reviewing submissions, holding hearings, receiving rebuttal comments, and consulting with the involved trading partners, the USTR will reach conclusions and propose responsive actions if necessary. These actions may include tariffs, fees on services, negotiations, or other measures.
Additionally, the USTR announced the initiation of a second Section 301 investigation, likely starting no earlier than Thursday afternoon, to focus on bans on imports of goods made with forced labor and assessing whether other countries have implemented similar measures.
The Section 301 investigations have been anticipated, as the Trump administration has repeatedly emphasized their focus on reconstructing Trump's tariff policy following the high court's ruling against IEEPA tariffs. The investigations are expected to cover most major trading partners and address areas of concern such as industrial excess capacity, forced labor, pharmaceutical pricing practices, and discrimination against U.S. technology companies and digital goods and services.