The US has launched an investigation under Section 301 (b) of the Trade Act of 1974 into more than a dozen countries, including India and China, citing structural excess capacity and over-production in certain manufacturing sectors. This is the first such probe launched by the Trump administration after the US Supreme Court last month declared the reciprocal tariffs he levied under the International Emergency Economic Powers Act as illegal.
Having initiated the investigations on March 11, the United States Trade Representative (USTR) said it will open dockets for submission of written comments on March 17, and the Section 301 Committee will convene public hearings on May 5. This could mean that fresh tariffs could be imposed on India and other countries after May.
USTR Jamieson Greer said, “These investigations will focus on economies that appear to exhibit structural excess capacity and production in various manufacturing sectors, such as through large or persistent trade surpluses or underutilised or unused capacity: China, the EU, Singapore, Switzerland, Norway, Indonesia, Malaysia, Cambodia, Thailand, Korea, Vietnam, Taiwan, Bangladesh, Mexico, Japan, and India.”
Targeting India, the USTR said India had a trade surplus of $58 billion with the US in 2025, and that the sectors include textiles, health, construction goods, and automotive goods.
“For example, evidence suggests the solar module sector is plagued by excess capacity, including that India’s current module manufacturing is nearly triple the annual domestic demand. India also has created significant excess capacity in petrochemicals, steel, and other industries,” the USTR said.
International trade experts said countries targeted in the investigation are those with which the US has trade deficits. Deborah Elms, Head of Trade Policy at Singapore-based Hinrich Foundation, in a social media post, said this is a “very fast” investigation with a short comment window and the mandated hearing in early May.
“The reason for this unusually rapid inquiry is that the statutory authority for existing US tariffs currently set by the Trump administration at 10% globally under a different legal power, Section 122 of the Trade Act of 1974, will expire on 27 July. The USTR’s goal is to replace these Section 122 tariffs with new measures by July,” Elms said.
Unlike other tariff authorities, Section 301 is unlikely to get overturned by US Courts or involve Congress, she said. “Any penalties that get applied are likely to be long-lasting, particularly since Section 301 empowers the executive branch to modify, adjust, or reopen cases at will in the future,” she said.
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Trade deficit with India a sore point
The US has targeted countries which have a trade surplus with it in goods. In 2025, India had a $58 billion surplus with the US. The manufacturing sectors which contributed to this include textiles, health and auto.
The USTR move assumes significance as India and the US agreed to a trade deal but have not formally signed it. Commerce and Industry Minister Piyush Goyal had said last month that the negotiations with the US would resume after further clarity on the tariff situation. The EU had paused the implementation of the EU-US trade deal after the US Supreme Court ruling, while other countries sought clarity from the US on the trade deal.
The USTR argued that structural excess capacity and production in manufacturing sectors present a serious challenge to US efforts to re-shore supply chains and provide good-paying jobs for American workers, and that key trading partners have developed production capacity untethered from the incentives of domestic and global demand.
Greer said, “This excess capacity leads to, among others, overproduction and large or persistent trade surpluses, as well as under-utilised and unused capacity, in manufacturing sectors. Structural excess capacity has been characterised generally as under-utilised industrial production capacity that is sustained through governmental interventions or policies incentivising companies to maintain or grow their unused capacity inefficiently.”
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