Section 301 Investigations Preview New Tariffs

The United States Trade Representative (USTR) announced new investigations under Section 301 of the Trade Act of 1974 to identify unfair trade practices.  These investigations -- similar to those under the first Trump Administration -- will likely be used to justify new country-specific Section 301 tariffs. The Administration has targeted the investigations at the following countries: China, the European Union, Singapore, Switzerland, Norway, Indonesia, Malaysia, Cambodia, Thailand, Korea, Vietnam, Taiwan, Bangladesh, Mexico, Japan, and India.  

Their justification for these investigations is narrowly focused on excess production, specifically concerns around the “significant challenges due to foreign economies’ structural excess capacity and production in manufacturing sectors. Across numerous sectors, many U.S. trading partners are producing more goods than they can consume domestically. 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. In many sectors, the United States has lost substantial domestic production capacity or has fallen worryingly behind foreign competitors.”

It is not surprising that the Trump Administration is leveraging Section 301 as the latest platform for potential tariffs -- after the Supreme Court ruling that effectively eliminated the International Emergency Economic Powers Act (IEEPA) and the likely termination of the Section 122 tariffs after 150 days (since Congress is unlikely to authorize and extension), the Administration has been fairly transparent that Section 301 tariffs would be a pathway they would use to advance the President's tariff agenda.  The reason this was not an option prior to the Supreme Court ruling is that Section 301 comes with some bureaucracy (public comment periods and public hearings) -- a hurdle that did not exist with either the IEEPA tariffs or the Section 122 tariffs, both of which were immediately implemented upon announcement.   

As this new agenda progresses, there will be much to watch.  Of course, some of the targeted countries have been working with the United States on bilateral commitments, and these new investigations may shift the tenor of ongoing discussions.