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 partners that could face new tariffs by this summer under the investigation of unfair trade practices, said U.S. Trade Representative Jamieson Greer.
Other countries subject to the excess-capacity probe under Section 301 of the Trade Act of 1974 are Taiwan, Vietnam, Thailand, Malaysia, Cambodia, Singapore, Indonesia, Bangladesh, Switzerland and Norway. Canada, the second-largest U.S. trading partner, was not included.
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
The 27-nation European Union has said it wants to stick to the terms of a deal signed at Trump’s Turnberry golf course last July, and that any new tariffs should reflect the broad 15% overall U.S. levy agreed then.
European Parliament lawmakers, who have repeatedly delayed a vote on that deal, said uncertainty remained.
“Who can guarantee that the final outcome will not mean even higher tariffs for the EU? It is not enough to simply assume – on both sides – that we will end up within the Turnberry framework. We need clarity,” trade committee chair Bernd Lange wrote on X.
Greer told reporters 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 cited the automotive sector in China and Japan, saying a growing number of companies were unprofitable or unable to meet interest payments.
Japan is scrutinizing details of the 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, 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 operate at only 55% of capacity.
Taiwan’s cabinet said in a statement that the agreement on reciprocal trade it signed with the U.S. last month established consensus on many issues potentially covered by the probe. Indonesia said its agreement with the U.S. remained the main guideline in bilateral trade relations.
USTR cited large German and Irish surpluses in goods trade with the United States as evidence of EU excess capacity. It also bemoaned Singapore’s, Norway’s and Switzerland’s hefty surpluses in trade with the U.S., alongside what it said was evidence of “structural excess capacity and production”.
U.S. 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. It will cover shipments from more than 60 countries.
The U.S. has already cracked down on solar panels and other goods from China’s Xinjiang region under the Uyghur Forced Labor Prevention Act, signed into law by president Joe Biden.
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. 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.
Public comments on the excess-capacity probe will be accepted through April 15 and a public hearing will be held around May 5.
U.S. Treasury Secretary Scott Bessent is due 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, Philip Blenkinsop in Brussels; Editing by Kevin Liffey)
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