US Targets 16 Nations in New Trade Probe Over 'Overproduction'

The Trump administration is preparing a new front in its global trade offensive, initiating a Section 301 investigation in mid-March against 16 economies that could lead to sweeping tariffs based on the novel concept of “structural excess capacity.”

"Across numerous sectors, many U.S. trading partners are producing more goods than they can consume domestically," the U.S. Trade Representative's office said in a statement. "This overproduction displaces existing U.S. domestic production or prevents investment and expansion in U.S. manufacturing production.”

The administration's criteria for this "overproduction" include countries making more of a product than they use and having factory capacity utilization below 80 percent. However, U.S. domestic capacity utilization is currently lower at 75.2 percent, and major American export industries like Boeing and agriculture ship the majority of their production overseas.

The move risks escalating into a multi-front trade war, potentially triggering widespread retaliation, disrupting supply chains, and fueling inflation, all while testing the legal boundaries of presidential authority after courts have already struck down similar tariff measures.

The investigation under Section 301 of the Trade Act of 1974 represents the administration's latest attempt to revive tariffs after significant legal setbacks. In February, the Supreme Court invalidated tariffs imposed under the International Emergency Economic Powers Act. More recently, the Court of International Trade on Thursday blocked a separate 10% across-the-board tariff, ruling it illegal.

The administration's new "structural excess capacity" argument has been met with skepticism from trade experts. The probe targets a diverse group of economies, from industrial giants like China and the European Union to smaller nations like Norway and Bangladesh. The administration's complaints treat normal export success as evidence of unfair practices.

For instance, the U.S. Trade Representative's office pointed to Norway's record seafood exports as a sign of malfeasance. Yet, as Ed Gresser, a former assistant U.S. trade representative, noted, this is a textbook example of comparative advantage, much like the U.S. dominates in passenger jet and almond exports.

The case against Bangladesh for overproducing cement is even more tenuous. U.S. imports of cement from Bangladesh have been negligible over the past three decades, making it difficult to argue that the country's production imposes any "burden" on American commerce as required for a Section 301 action.

Critics argue the administration is stretching the intent of Section 301, which is designed as a tool to negotiate the removal of specific foreign government policies that are "unreasonable or discriminatory." They contend it is not a blanket authorization for the president to impose tariffs by decree, an authority the Constitution grants to Congress. If the White House wishes to implement higher tariff rates, it should seek legislative approval from Congress, following the precedent of past administrations.

This article is for informational purposes only and does not constitute investment advice.