US Launches Section 301 Probe Into Korea, 15 Others Over Manufacturing Overcapacity

The Office of the United States Trade Representative announced it will launch a Section 301 investigation into 16 countries including South Korea over manufacturing overcapacity, adding trade policy uncertainty as surging oil prices weigh on the economy.

The probe could lead to tariffs following consultations with affected nations. The US also signaled investigations into digital regulations, pharmaceutical pricing, and rice market access—areas where Washington has long raised concerns with Seoul.

"We will no longer sacrifice our industrial base to other countries that export their overcapacity problems to the United States," USTR Ambassador Jamieson Greer said.

Trade Surplus Cited as Evidence

USTR published notice in the Federal Register on March 11 initiating the investigation into "acts, policies, and practices" related to structural overcapacity in manufacturing. The 16 targets include China, Japan, the European Union, Singapore, Switzerland, Norway, Indonesia, Malaysia, Cambodia, Thailand, Vietnam, Taiwan, Bangladesh, Mexico, and India.

Washington argues these countries produce goods exceeding demand, depressing prices and hollowing out American manufacturing. The US government has long contended that steel overcapacity drove down global prices, forcing American steelmakers into bankruptcy and effectively destroying the domestic industry.

For Korea, USTR cited persistent trade surpluses as evidence of overcapacity. "Korea maintains a global merchandise trade surplus, anchored by exports of electronic equipment, automobiles and parts, machinery, steel, and ships," the notice stated. "Korea's global merchandise trade balance swung sharply from a $10 billion deficit in 2023 to a $52 billion surplus in 2024."

USTR added that "the Korean government has acknowledged the need to reduce production capacity in the petrochemical sector."

Consultations Planned, But Tariffs Likely

The investigation does not trigger immediate tariffs. USTR said it will consult with affected governments under applicable statutes, accepting public comments from March 17 through April 14 ahead of a May 5 hearing.

"We will take responsive action as needed thereafter," Greer said at a briefing. "This could include tariffs, service fees, and other measures."

He noted that the Section 301 investigation into China during President Donald Trump's first term led to strengthened reviews by the Treasury Department's Committee on Foreign Investment in the United States, tighter Commerce Department export controls, and World Trade Organization disputes over intellectual property.

However, concerns persist that tariffs may be unavoidable even after consultations, as the probe appears aimed at replacing revenue lost following the Supreme Court's ruling last month that reciprocal tariffs were unlawful.

"Our goal is to complete the investigation before the Section 122 tariffs expire," Greer said, suggesting decisions on tariffs could come by late July. The administration imposed 10 percent tariffs globally under Section 122 on February 24, immediately after the court ruling. Those tariffs expire after 150 days.

Digital Services, Pharmaceuticals, Rice Also in Crosshairs

USTR signaled additional Section 301 investigations ahead. "There will be more Section 301 investigations," Greer said. "Digital services taxes, pharmaceutical pricing, fisheries and rice market access, and environmental issues such as marine pollution could be additional targets."

The US has questioned whether the Korean government discriminated against Coupang and views legislative measures including proposed amendments to the Information and Communications Network Act as chilling free expression and burdening American technology companies.

Pharmaceutical pricing could also face scrutiny. USTR's National Trade Estimate Report released March 31 last year stated that "US industry cites a lack of transparency in Korea's drug pricing decisions and reimbursement policies" and noted "insufficient opportunity for stakeholders to provide meaningful input during policy changes."

On rice, Washington's longstanding position holds that Korea should open its market.

Forced Labor Probe Could Draw Korea In

Korea may also be included in a separate Section 301 investigation on forced labor. Greer announced USTR would launch a second investigation on March 12 examining whether to ban imports of goods produced with forced labor.

"The United States has maintained laws prohibiting imports of goods made with forced labor for approximately 100 years," Greer said. "We believe our trading partners should adopt similar approaches."

The investigation will focus on whether countries have implemented laws prohibiting imports of forced-labor goods and will cover approximately 60 nations. The probe appears aimed primarily at China, though attention is focused on whether Korea will be included.

If included, Korea could face pressure to restrict imports from China, potentially creating trade friction with its largest trading partner.