U.S. Section 301 probe should spare allies

The Office of the United States Trade Representative said Wednesday it has launched an investigation under Section 301 of the U.S. Trade Act into 16 countries, including South Korea, China and Japan, citing concerns over “overcapacity.” The move marks a follow-up step by the administration of U.S. President Donald Trump to restore the 25 percent reciprocal tariffs that were struck down last month by a ruling from the Supreme Court of the United States. While the probe had been widely expected, its outcome remains uncertain.

Section 301 of the U.S. Trade Act grants the executive branch authority to respond to discriminatory measures taken by foreign governments against American companies. It is a powerful trade retaliation tool that allows Washington to impose not only steep tariffs but also broader sanctions, including export restrictions and investment controls. During Trump’s first administration, the provision was used to impose sweeping trade retaliation against China, including high tariffs, and served as a key negotiating lever.

Following the court ruling last month that invalidated the reciprocal tariffs, President Trump temporarily imposed a “global tariff” of 10 percent that can remain in place for up to 150 days and pledged to raise it to 15 percent. The Office of the United States Trade Representative is expected to complete its Section 301 investigation by late July, when the temporary tariff expires, and impose substitute tariffs on major trading partners. The concern is that the agency, pressed by the approaching deadline, could conduct a forced investigation designed to justify predetermined measures or resort to excessive retaliation.

Complicating matters further is the ambiguous definition of “overcapacity,” the issue cited by the U.S. government. The list of possible causes includes government subsidies, wage suppression, state-owned enterprises, trade barriers, preferential lending, financial repression and currency policies. In practice, the criteria are so broad that almost any country could fall under scrutiny. The U.S. trade office said the South Korean government had acknowledged the need to reduce production capacity in the petrochemical sector. However, the claim appears to misidentify the root cause. The fundamental problem lies in overproduction by China’s petrochemical industry, fueled by inexpensive crude oil from Iran and Russia and accompanied by aggressive export dumping.

South Korea and the United States reached an agreement last year under which Seoul pledged a $350 billion South Korean investment package in the United States, while Washington agreed to lower reciprocal tariffs on South Korea to 15 percent. The South Korean National Assembly on Wednesday also passed a special law to support investment in the United States. The U.S. trade representative said the bilateral trade agreement would remain in place but warned that additional tariffs or other measures could follow depending on the outcome of the Section 301 investigation. If South Korea were treated less favorably than other U.S. trade partners such as Japan and Taiwan, or subjected to additional tariff retaliation, the momentum to implement the agreement could weaken.

The U.S. trade office has also raised the possibility of additional country-specific Section 301 investigations. At a time when South Korea is attempting to address U.S. industry concerns over non-tariff barriers, including allowing the overseas transfer of digital map data, it must avoid becoming the target of further investigations or punitive tariffs. If goodwill is met with hostility, it will benefit neither country.