By David Lawder and Ismail Shakil
WASHINGTON, March 12 (Reuters) – U.S. President Donald Trump’s administration said on Wednesday it was launching two trade investigations into excess industrial capacity in 16 major trading partners and into forced labor, rebuilding tariff pressure after the Supreme Court tore down much of Trump’s tariff program last month.
China, the European Union, India, Japan, South Korea and Mexico are among countries that could face new tariffs by this summer under the “Section 301” investigation of unfair trade practices, said U.S. Trade Representative Jamieson Greer.
Other trading partners subject to the excess-capacity probe under Section 301 of the Trade Act of 1974 include Taiwan, Vietnam, Thailand, Malaysia, Cambodia, Singapore, Indonesia, Bangladesh, Switzerland and Norway. Canada, the second-largest U.S. trading partner, was not mentioned as a target of the probe.
China said on Thursday the U.S. claim of overcapacity was a “false proposition” and Beijing opposed “political manipulation under this pretext”. China is against all forms of unilateral tariff measures, foreign ministry spokesperson Guo Jiakun said at a regular press conference.
U.S. LOOKING AT TRADE SURPLUSES, UNDERUSED CAPACITY
Greer told reporters on a conference call that the investigations “will focus on economies that we have evidence appear to exhibit structural excess capacity and production in various manufacturing sectors, such as through larger persistent trade surpluses, or underutilized or unused capacity”.
USTR’s official notice for the excess capacity probe cited the automotive sector in China and Japan, saying a growing number of companies were unprofitable or unable to meet interest payments from operations.
Japan is scrutinizing details of the Section 301 probe but will continue to implement its existing trade agreement with the U.S., Chief Cabinet Secretary Minoru Kihara told a press conference.
USTR said although China’s electric-vehicle capacity outstrips national demand, the country’s top EV maker, BYD, was “aggressively expanding” its overseas manufacturing footprint, with factories in Uzbekistan, Thailand, Brazil, Hungary and Turkey, and was expected to expand capacity in Europe, where existing automotive plants are operating at only 55% of capacity.
South Korea will seek to prevent its exporters from suffering unfavorable treatment compared to other major countries, the industry ministry said, without elaborating.
Taiwan’s cabinet said in a statement that the agreement on reciprocal trade it signed with the U.S. last month established consensus on multiple issues potentially covered by the Section 301 investigation. Similarly, Indonesia said its agreement with the U.S. remained the main guideline in bilateral trade relations.
Thailand’s Commerce Ministry has set up a working group to prepare for the 301 investigation and will start discussions soon, prepare documents thoroughly and “be as ready as possible,” Arada Fuangtong, the director-general of the Department of Foreign Trade, told Reuters.
USTR cited large U.S. trade surpluses in Germany and Ireland as evidence of EU excess capacity. Singapore has excess global capacity in semiconductors despite a trade deficit with the U.S. and Norway had excess capacity, evidenced by large fuels and seafood exports, it said.
USTR ALSO PLANS PROBE ON FORCED LABOR
Greer said he would initiate another Section 301 probe on Thursday, under a provision to ban U.S. imports of goods produced with forced labor. That investigation will cover shipments from more than 60 countries.
The U.S. has already cracked down on solar panel imports and other goods from China’s Xinjiang region under the Uyghur Forced Labor Protection Act, signed into law by then-President Joe Biden. The new probe could expand such actions to other countries.
Greer said he wanted other countries to enforce bans on goods produced with forced labor similar to those enshrined in a nearly century-old trade law.
The U.S. alleges that Chinese authorities have established labor camps for ethnic Uyghur and other Muslim groups in the western region. Beijing denies allegations of abuse.
Greer said he hoped to conclude the Section 301 investigations, including proposed remedies, before temporary tariffs imposed by Trump in late February expire in July. After the Supreme Court struck down Trump’s global tariffs as illegal under a national emergencies law on February 20, he imposed a 10% tariff for 150 days under Section 122 of the Trade Act of 1974.
He laid out a swift timeline for the excess-capacity probe, with public comments accepted through April 15 and a public hearing around May 5.
The probes offer the Trump administration an avenue to rebuild a credible tariff threat against trading partners to keep them negotiating and implement trade deals that were cut to reduce his higher tariff rates under the International Emergency Economic Powers Act.
The probes come as Trump officials led by U.S. Treasury Secretary Scott Bessent prepare to meet Chinese counterparts in Paris this week to set the stage for Trump to meet Chinese President Xi Jinping in Beijing at the end of the month.
Trump’s tariffs on Chinese goods were effectively cut by 10 percentage points by the Supreme Court decision and subsequent temporary tariffs, reducing U.S. leverage on China trade and export controls.
(Reporting by David Lawder in Washington and Ismail Shakil in Ottawa; Additional reporting by Eduardo Baptista in Beijing, Heejin Kim in Seoul, Ben Blanchard in Taipei, Stefanno Sulaiman in Jakarta and Panarat Thepgumpanat in Bangkok; Editing by Matthew Lewis, Stephen Coates and Raju Gopalakrishnan)
