March 13, 2026

USTR Initiates Section 301 Probe into Structural Excess Capacity and Production in Manufacturing Sectors

Samantha Carl-Yoder, Evan Chuck, Annmarie Conboy-DePasquale, Aaron Cummings, J. Brady Howell, Daly Martorano, Radha Mohan Brownstein Hyatt Farber Schreck + Follow Contact LinkedIn Facebook X Send Embed

On March 11, the Office of the U.S. Trade Representative (USTR) initiated investigations under Section 301 of the Trade Act of 1974 (19 U.S. Code § 2411) into whether certain countries’ policies have resulted in structural excess capacity and production in manufacturing sectors. Targeted countries include: China, the European Union (EU), Singapore, Switzerland, Norway, Indonesia, Malaysia, Cambodia, Thailand, Korea, Vietnam, Taiwan, Bangladesh, Mexico, Japan and India.

Section 301 grants the agency expansive authority to investigate and then remedy “unfair” trade practices, including by imposing tariffs. The first Trump administration leveraged the statute to impose tariffs on a wide range of Chinese goods, which the Biden administration largely maintained or expanded. Since returning to office, the Trump administration has launched two other Section 301 probes, into China and Brazil, that remain ongoing.

In the wake of Learning Resources, Inv. v. Trump, the Supreme Court decision invalidating tariffs under the International Emergency Economic Powers Act (IEEPA), Ambassador Jamieson Greer indicated that the administration would invoke a series of Section 301 investigations. While President Trump appears to favor a “baseline” tariff of at least 10% on all trading partners, Ambassador Greer and other senior USTR officials have been careful not to prejudge the results of this Section 301 investigation. They have emphasized that while tariffs are a potential outcome, the administration intends to conduct further negotiations with targeted trading partners. After the investigations are complete, the administration could use these tariffs to bring duties back to the level they were before the Learning Resources case for the targeted countries. The administration is timing these investigations to conclude before the president’s baseline 10% tariffs imposed under Section 122 of the Trade Act of 1974 expire.

A USTR fact sheet contrasts “cyclical excess capacity” with “structural excess capacity,” which it describes as leading to “large or persistent trade surpluses in certain manufacturing sectors, as well as underutilized and unused capacity.” The fact sheet includes an “illustrative list of sectors plagued by excess capacity and production” consisting of: “aluminum, automobiles, batteries, cement, chemicals, electronics, energy goods, glass, machine tools, machinery, paper, plastics, processed food and beverages, robotics, satellites, semiconductors, ships, solar modules, steel, and transportation equipment.”

Stakeholders should be aware of the following deadlines related to the new Section 301 probe:

• March 17, 2026: USTR will open dockets for submission of written comments and requests to appear at the public hearing.
• April 15, 2026: To be assured of consideration, submit written comments and any requests to appear at the public hearing, along with a summary of the testimony, by this date.
• May 5, 2026: The Section 301 Committee will convene the public hearing beginning at 10:00 a.m., continuing, as necessary, until May 8.
• Seven calendar days after the last day of the public hearing:Due date for submission of post-hearing rebuttal comments. Below provides a summary of the regulatory processes under Section 301 and the investigation, as well as an analysis of the political landscape.

BACKGROUND ON SECTION 301 OF THE TRADE ACT OF 1974

The statute grants USTR the authority to investigate whether an act, policy or practice of a foreign country either “violates, or is inconsistent with, the provisions of, or otherwise denies benefits to the United States under, any trade agreement” or “is unjustifiable and burdens or restricts United States commerce.” This investigation can be triggered by USTR itself or by petitions from outside parties. If a petition is received, USTR must determine whether to initiate an investigation within 45 days, but the statute does not specify any parameters for what constitutes valid grounds for initiation.

After initiating an investigation, USTR is required to request a consultation with the respective government. This process is largely intended to reach a resolution with a country that maintains a comprehensive trade agreement with the United States. If a satisfactory outcome cannot be achieved, then USTR is required to move forward with formal dispute settlement proceedings under the respective agreement. Beyond this requirement, Section 301 lacks any significant procedural or substantive limits.

The investigation is conducted by a Section 301 Committee, a subordinate body of the Trade Policy Staff Committee (TPSC). After holding a public hearing and reviewing any stakeholder comments, the committee submits its recommended actions to TPSC, which in turn makes a final recommendation to the ambassador.

Section 301 investigations have three potential conclusions:

1. The investigated practices are unfair. In such case, Section 301 requires mandatory U.S. trade restrictions that are equivalent in value to the burden being imposed by the other country.

• The investigated practices are unreasonable or discriminatory and burden commerce. In such case, Section 301 allows —but does not require—“all appropriate and feasible action, subject to the specific direction of the president, to obtain the elimination of the act, policy, or practice.”

• The investigated practices do not create a Section 301 violation. In such case , Section 301 delegates no tariff or trade restriction authority.
  As long as USTR determines a country has engaged in unfair or unreasonable practices, the president has the broad authority to impose tariffs and other import controls for an open-ended period of time.

Notably, Section 301 investigations and any subsequent tariffs have traditionally been applied on a country-specific basis. No previous administration has initiated a single investigation into the policies and practices of multiple countries.

USTR INVESTIGATION RELATING TO STRUCTURAL EXCESS CAPACITY AND PRODUCTION IN MANUFACTURING SECTORS (FACT SHEET , NOTICE , PUBLIC DOCKET )

USTR is investigating countries “that appear to exhibit structural excess capacity in various manufacturing sectors, such as through large or persistent trade surpluses or underutilized or unused capacity.” The listed countries are: Bangladesh, Cambodia, China, the EU, India, Indonesia, Japan, Korea, Malaysia, Mexico, Norway, Singapore, Switzerland, Taiwan, Thailand and Vietnam.

The agency expresses concern that these countries export excess goods to the United States directly or through third countries, undermining U.S. efforts to expand domestic manufacturing and increase American jobs. The notice cites evidence that global manufacturing capacity continues to exceed global demand, which allows select countries to maintain large trade surpluses with the rest of the world. USTR alleges governments are employing key interventions to maintain excess capacity, such as:

• Promoting production and export untethered from market drivers of supply, demand and investment, including through subsidies;
• Suppressing domestic wages;
• Non-commercial activities of state-owned or -controlled enterprises;
• Sustained market access barriers;
• Lax or inadequate environmental or labor protection or social safety net;
• Subsidized lending; and
• Financial repression and currency practices. USTR states the practices are especially harmful to key domestic industries, including aluminum, automobiles, electronics, semiconductors and steel, among others, which “[have] lost substantial domestic production capacity or [have] fallen worryingly behind foreign competitors.”

ANALYSIS

Although anticipated, the Section 301 investigation is likely to impact ongoing negotiations with key trading partners. Next week, the United States and Mexico are set to hold the first round of bilateral discussions in preparation for the Joint Review of the U.S.-Mexico-Canada Agreement (USMCA). Additionally, President Donald Trump is scheduled to hold negotiations with Chinese President Xi Jinping during his state visit to Beijing from March 31 to April 2. The Trump administration may seek to use the ongoing probe as leverage in these discussions, but trading partners may view the action as contrary to good faith efforts to strengthen trade relations.

In regard to nations that have reached a trade framework with the United States, the investigation and the potential for any corresponding trade measures could be perceived as a violation of U.S. commitments to maintain tariffs at a specified rate. During a daily press briefing, European Commission spokesperson Olof Gill told reporters that the EU would respond “firmly and proportionately to any breach” of the United States-European Union Framework on an Agreement on Reciprocal, Fair, and Balanced Trade reached in August 2025. He emphasized that the EU “shares the United States’ concern regarding structural overcapacity” but “does not consider itself a contributor” to global distortions.

While the probe is concerning for targeted countries, its outcome is not predetermined, and USTR may determine that a targeted nation’s policies do not constitute a Section 301 violation. The agency is prohibited from prejudging the outcome of an investigation, and the Trump administration has been clear that it intends to consider deploying all of the tariff tools at its disposal in the absence of IEEPA. Ultimately, USTR is likely to conclude its investigation around or before the expiration of the 10% tariff imposed under Section 122 to maintain pressure on countries with open trade negotiations at that time. Barring an extension by Congress, the 122 tariff will remain in effect through July 24, 2026.

NEXT STEPS

In the wake of USTR’s initiation of a multicountry Section 301 investigation, our team stands ready to help impacted entities in navigating the process and managing associated risks. We can help assess and respond to issues such as:

• Preparing and engaging on public comments;
• Conducting tariff impact assessments on supply chains;
• Diversifying or restructuring supply chains in anticipation of potential tariff measures; and

• Developing risk-mitigation strategies, such as tariff engineering, country-of-origin review or leveraging existing Free Trade Agreements.
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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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