The United States has launched a Section 301 investigation into excess industrial capacity across 16 major trading partners, including India, China, the EU, Japan, and South Korea. The probe targets structural overproduction, trade surpluses, subsidies, low wages, and state-backed industrial policies, potentially leading to tariffs this summer.
India’s inclusion is particularly significant following the recent interim bilateral trade framework with the US, designed to set the stage for broader negotiations under a Bilateral Trade Agreement (BTA). Key manufacturing sectors—such as electronics, metals, engineering goods, and solar equipment—may face increased scrutiny in the US investigation into excess industrial capacity. While sweeping tariffs seem unlikely, targeted sector-specific measures could create trade risks and add strategic complexity to India–US relations, supply chains, and future negotiations.
The United States administration under President Donald Trump has launched a new trade investigation targeting excess industrial capacity among 16 major trading partners, in a move that could result in fresh tariffs. The action is part of a broader effort to restore tariff pressure after the US Supreme Court invalidated the central component of Trump’s earlier global tariff programme last month.
US Trade Representative Jamieson Greer announced that the investigation will be conducted under Section 301 of US trade law, which allows Washington to respond to unfair trade practices by imposing tariffs or other trade restrictions. The provision has previously been used by Washington to impose broad tariffs on Chinese imports. (In his first term, Trump used a Section 301 probe to justify tariffs of about 25% on many Chinese imports, a legal tool widely seen as more resilient to court challenges.)
The probe could lead to new tariffs as early as this summer on a group of economies that includes China, the European Union, India, Japan, South Korea and Mexico. In addition to these major economies, the investigation will also examine Taiwan, Vietnam, Thailand, Malaysia, Cambodia, Singapore, Indonesia, Bangladesh, Switzerland and Norway.
Canada, despite being the second-largest US trading partner, was not included among the targeted economies.
Washington maintains that some countries promote large-scale manufacturing through substantial subsidies, low-cost financing and government-backed industrial policies. According to US officials, these measures can result in production levels exceeding global demand, which in turn drives prices down and leads to a surge of cheaper exports to global markets. While such concerns have traditionally been directed mainly at China, officials say the pattern is now visible in several other economies as well, including emerging manufacturing hubs.
According to Greer, the investigation will focus on countries that appear to maintain structural excess manufacturing capacity. The US government will examine indicators such as persistent trade surpluses, large current account balances, and evidence of unused or underutilised production capacity in industrial sectors. The inquiry will review policies that may distort competition, including
If evidence shows these practices are harming US industries, Washington could respond with targeted tariffs or additional trade curbs.
The investigation follows a Supreme Court ruling on February 20 that declared Trump’s earlier global tariffs illegal because they had been imposed using emergency powers under a national emergencies law. After the ruling, the administration introduced temporary tariffs of 10% for a period of 150 days under Section 122 of the Trade Act of 1974.
Officials hope to complete the new Section 301 investigation, including any proposed remedies, before those temporary tariffs expire in July. The process is expected to advance rapidly, with public comments accepted until April 15 and a hearing anticipated around May 5.
In addition, the administration plans to launch another Section 301 investigation focused on banning imports produced with forced labour. This inquiry could cover more than 60 countries. The United States has already placed tighter curbs on solar panels and other goods from China’s Xinjiang region under the Uyghur Forced Labor Protection Act signed by former president Joe Biden. The probe could bring additional countries under similar restrictions.
India’s inclusion in the investigation is noteworthy as it comes just weeks after the two countries announced a framework for an interim bilateral trade arrangement. The February understanding between Donald Trump and Prime Minister Narendra Modi was intended to set the stage for a broader India–US Bilateral Trade Agreement (BTA). Under the framework, India agreed to cut or remove tariffs on several US industrial and agricultural products. The United States, in turn, said it would apply an 18% reciprocal tariff structure on Indian goods, down from the earlier proposed 50%. Both sides also committed to addressing non-tariff barriers and expanding market access. Trump additionally said India would purchase US$ 500 billion worth of US goods over five years.
However, Washington has stressed that ongoing negotiations will not exempt countries from probes under Section 301 of the Trade Act of 1974.
The immediate economic effects for India, according to analysts, remain uncertain but the probe introduces an added element of trade risk. As the United States is India’s largest export destination, several key sectors could be affected if tariffs are eventually introduced.
The United States is among the few countries with which India recorded a trade surplus in FY25. India’s key exports to the US include engineering and electronic goods, gems and jewellery, pharmaceutical products, light crude oil and petroleum, electrical equipment, and other manufactured items.
In FY25, bilateral trade between India and the United States reached a record US$ 132.2 billion, up from US$ 119.71 billion in FY24. During the same period, India recorded a trade surplus of US$ 40.82 billion with the US. The United States is also the third-largest investor in India, with cumulative foreign direct investment inflows of US$ 70.65 billion between April 2000 and March 2025.
Between April and January of 2025–26, India exported US$ 20.9 billion worth of electronics, including smartphones, to the United States. Other major exports included US$ 7.9 billion in textiles, US$ 7.25 billion in pharmaceuticals, US$ 5.98 billion in engineering goods, US$ 4.83 billion in metals and related equipment, US$ 4.19 billion in gems and jewellery, US$ 2.03 billion in auto components, and US$ 0.96 billion in solar equipment.
Notably, the key Indian manufacturing sectors—including electronics, metals, engineering goods, and solar equipment—could come under heightened scrutiny in the US excess-capacity investigation. If tariffs are imposed, even at a moderate rate of 10–15%, they could significantly undermine the price competitiveness of these products in the US market.
Analysts assess that the likelihood of broad-based tariffs on India remains low, primarily due to ongoing negotiations for a comprehensive bilateral trade agreement with the United States. Instead, the United States is more likely to pursue targeted measures, such as sector-specific tariffs or interventions aimed at particular supply chains, which would allow it to address perceived trade imbalances without jeopardizing the broader economic relationship.
The Section 301 investigation signals the US’s heightened focus on global industrial overcapacity, placing India’s export sectors under potential scrutiny. While ongoing bilateral negotiations and the interim trade framework reduce the risk of broad-based tariffs, targeted duties on electronics, metals, engineering goods, pharmaceuticals, and solar equipment could affect competitiveness, supply chains, and strategic planning.
Trade experts caution that casting such a wide net could backfire on Washington. By targeting allies and rivals alike, the US risks fraying the very relationships it needs to build a united front against China’s manufacturing dominance — leaving its partners feeling accused rather than recruited.
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FAQ
What is Section 301 of US trade law? Section 301 empowers the US government to investigate and respond to foreign trade practices it considers unfair, including subsidies, overproduction, and policies that distort competition. It can lead to tariffs or other trade restrictions.
Why is India being investigated under Section 301? India is included due to concerns over structural excess manufacturing capacity, trade surpluses, and policies that could potentially affect US industries, even as bilateral trade negotiations continue.
Which Indian sectors could be targeted under Section 301? Key sectors likely under scrutiny include electronics, metals, engineering goods, pharmaceuticals, gems and jewellery, and solar equipment—major contributors to India’s exports to the US.
What actions can the US take under Section 301? The US may impose targeted tariffs, trade restrictions, or sector-specific measures to address perceived unfair trade practices, rather than broad-based duties across all imports.
How does Section 301 affect India–US trade relations? While broad-based tariffs are unlikely due to ongoing negotiations, the probe adds uncertainty, influencing export competitiveness, supply chains, and strategic planning in India–US trade.
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