ON March 11, the United States initiated investigations regarding the acts, policies, and practices of 16 economies under Section 301(b) of the Trade Act of 1974.
The investigations, to be undertaken by the US Trade Representative (USTR), will pronounce on whether structural excess capacity and production in manufacturing sectors in countries, including Cambodia, Indonesia, South Korea, Malaysia, Thailand and Vietnam, discriminate or restrict US business and commerce.
What are the main aspects of a Section 301 investigation, why have the investigations been controversial, why has the Trump administration initiated the investigations?
Called the Section 301 investigation, it involves Section 301-310 of the Act. The process involves an investigation by the USTR, consultations with the foreign government under probe, public comments, hearings, reviews and recommendations.
It could take between 12 and 18 months. Brazil, China, the European Union (EU) and Indonesia have been investigated on multiple occasions.
Pursuant to an investigation, if policies or actions of foreign countries are determined to be harmful to American commerce, the USTR is authorised to “suspend, withdraw, or prevent the application of, benefits of trade agreement concessions”, impose duties or other import restrictions on the goods or services of such foreign country.
The USTR is not required to take action if it finds that “the foreign country is taking satisfactory measures to grant the rights of the United States under a trade agreement”.
Section 301 investigations have been extremely controversial, especially from the World Trade Organisation (WTO) perspective. Many WTO Members, including the developing countries, viewed that unilateral action by the United States under Sections 301-310, are in breach of multiple provisions of WTO agreements.
In 1998, the EU challenged the provision at the WTO, arguing that unilateral trade sanctions could violate certain key provisions of its dispute settlement system.
WTO dispute
After the WTO dispute panel found certain aspects of Sections 301-310 to be prima facie inconsistent with the United States’ obligations under the dispute settlement understanding, its analysis took a strange and unusual twist.
It took into consideration the Statement of Administrative Action (SAA) which accompanied the US legislation implementing the results of the Uruguay Round of trade negotiations and submitted by the President to Congress.
The panel stated that since the United States had assured that it would not take unilateral actions under Sections 301-310 as per the SAA, and had undertaken to wait for determinations by the Dispute Settlement Body of the WTO before taking action there was no inconsistency in the provisions with the WTO obligations of the United States.
Why has the Trump Administration initiated Section 301 investigations?
Within hours after the Supreme Court struck down the April 2, 2025 tariffs under the International Emergency Economic Powers Act which had provided the legal basis for imposing reciprocal tariffs, the White House invoked Section 122 of the Trade Act of 1974 and imposed a uniform tariff of 10% across countries.
We are likely to see a rush to complete the investigations before the tariffs under Section 122 expire. The objective of the investigations is clear – to prevent countries from walking away from their respective Agreements for Reciprocal Trade (ARTs) with the United States, which are substantially skewed in the favour of the United States.
Many have described the ARTs as effectively unilateral agreements. Tariffs and other restrictions that may be imposed after Section 301 investigations would create further leverage for the United States to extract additional concessions from the countries being investigated.
The approach of the United States in the notice initiating Section 301 investigation is to treat persistent goods trade surplus in certain sectors as evidence of structural excess capacity.
While this could be true for a few countries, generalising this approach and applying it across many countries negates the concept of comparative advantage. Thus, the initiation of Section 301 investigations appears to be based on a shaky foundation.
Procedural flaws
Further, given the compressed timeframe within which Section 301 investigations are likely to be completed, many apprehend that the investigations may be riddled with procedural flaws and substantive legal deficiencies.
What should the countries being investigated do? While they could consider participating constructively in the investigations, they must realise that the investigations are essentially a part of the US armoury for economic coercion.
They must not rush into ratifying their trade deal with the United States, in the expectation that this would insulate them from punitive action under Section 301-310. ARTs with the United States do not assure any such protection.
For example, the only benefit for Malaysia from its ART was an exemption from the reciprocal tariffs for some products, but now the reciprocal tariffs have been struck down as illegal by the Supreme Court, there is literally no benefit for Malaysia from the deal because it does not include any exemptions from sections 301 – 310 or other tariffs.
In any event, ARTs are no longer valid as their very basis – the reduction or exemptions from reciprocal tariffs – is illegal.
Countries also need to devise a strategy for dealing with additional demands from the United States, which might arise consequent to the investigations.
If Cambodia, Indonesia, Malaysia and other developing countries wish to pursue policies in their domestic interest, they need to muster the political will to firmly stand up to the bullying tactics of the United States. Failure to do so will keep them hostage to US interests and its strong-arm tariff tactics.
Abhijit Das is an international trade expert and author of ‘Strategies in GATT and WTO Negotiations’ published by Oxford University Press in 2025. The views expressed here are the writer’s own.
