Section 301: A new trade test from Washington

The new US investigations do not, in themselves, raise tariffs, but they are a reminder that Dhaka remains vulnerable to legal and political trade pressure despite the recent bilateral agreement.

Just when Dhaka might have hoped that its trade tensions with Washington were entering a more manageable phase, the United States has opened a new line of pressure.

On March 11, the Office of the US Trade Representative (USTR) launched Section 301 investigations into 16 countries for alleged “structural excess capacity and production in manufacturing sectors”. Bangladesh was on the list. The following day, the USTR opened a second round of investigations — covering 60 economies — into failures to take sufficient action to prohibit the importation of goods produced with forced labour. Bangladesh appeared there too.

The timing is no accident. On February 20, in Learning Resources v. Trump, the US Supreme Court ruled that the president’s use of the emergency-powers law IEEPA to impose sweeping tariffs was unlawful. But the decision did not end American tariff activism; it merely redirected it toward statutory channels with firmer legal foundations. The US government then turned to Section 122 — used for balance-of-payments problems — as a temporary replacement. Yet Section 122 is a limited device: it allows tariffs of up to 15 percent for only 150 days.

Section 301, by contrast, was waiting in the wings as the more durable instrument. US Treasury Secretary Scott Bessent has said that even after the Supreme Court reduced the president’s power to impose tariffs under IEEPA, the United States could still raise nearly as much money from tariffs by using other laws.

These include Section 301; the temporary tariffs announced on February 20 under Section 122; and Section 232, which allows tariffs on imports said to threaten national security.

These Section 301 investigations are not tariffs. Not yet. The formal process follows public comments, which close on April 15. Hearings on the structural excess-capacity investigations begin on May 5; hearings on the forced-labour investigations begin on April 28. Consultations and findings come after that. No tariff wall faces Bangladesh tomorrow. But the legal scaffolding for one is being erected.

The excess capacity investigation deserves scrutiny because its economic logic is tenuous. USTR identifies Bangladesh as exhibiting structural excess capacity and production. The implicit argument is that Bangladesh’s garment success reflects a government-distorted production base harmful to US workers.

This argument collapses under closer scrutiny. Jeffrey Sachs of Columbia University — one of the world’s leading development economists — has argued that “excess capacity” is a meaningful trade complaint only under narrow conditions: if a country is producing goods for which there is no genuine global demand, or if it is exporting them at a loss.

Where a country is simply an efficient, low-cost producer of things the world actually wants, the term becomes, in his words, not an analytical category but a political weapon. Nicholas Lardy of the Peterson Institute sharpens the point further: if producing more than you consume domestically is the offence, then the United States — which exports roughly 80 percent of its domestically produced semiconductors — is guilty too.

So is Germany, which exports nearly 80 percent of its cars, and Japan, which exports around half its automotive output.

Bangladesh exports labour-intensive garments for which there is obvious demand. That is not a distortion; it is not the artifact of government policies such as subsidies, state financing, and industrial planning that allow factories to keep producing even when market conditions do not support it — it is comparative advantage.

The “excess capacity” label has ceased to be an analytical category and has become a political one, deployable against competitive exporters whenever domestic pressures require it. Its economic foundations may be thin; its legal consequences are not. Bangladesh should challenge the reasoning in the forthcoming comment process. It should also take the threat seriously.

The forced-labour investigation appears to rest on two linked concerns: whether Bangladesh is doing enough to keep goods made with forced labour out of its imports and supply chains, and whether any failure to do so gives its manufacturers an unfair cost advantage over American firms. This aspect of the US case may have more traction because the underlying concern is not entirely implausible. Washington removed Bangladesh from its Generalized System of Preferences in 2013 over labour-rights failures, only months after the Rana Plaza collapse killed more than 1,100 workers. Since then, Bangladesh has made some important but incomplete progress through inspections, legal reforms, and compliance programmes. Yet enforcement has remained uneven and, at times, visibly weak.

The February trade agreement had already dealt with this. Bangladesh committed in writing to “prohibit forced labour imports and strengthen collective bargaining rights.” Washington is now investigating whether those commitments were genuine, making this notably the first time Section 301 has been used to target a government’s alleged inaction on forced labour as an “unreasonable” trade practice.

There is, however, a certain irony in Washington’s present posture. The United States is invoking labour rights as a basis for trade enforcement, even though it has itself ratified only a limited number of International Labour Organization conventions; indeed, it has not ratified some of the most important ones on freedom of association and collective bargaining.

That does not make forced labour any less unacceptable, nor does it excuse Bangladesh, where reform remains incomplete. But it does underline a familiar asymmetry in international trade politics: powerful countries often demand, through trade instruments, standards that they have accepted only selectively.

Moral inconsistency on the part of the stronger party does not, however, absolve the weaker party of its legal exposure.

What must Dhaka do now? Three things follow. First, engage Section 301 processes before April 15. This is not a formality — it is an opportunity to present evidence, challenge the excess-capacity charge, and distinguish Bangladesh’s circumstances from China’s, the economy these investigations were primarily designed to target.

Second, treat labour governance as a trade priority. Weak enforcement and supply-chain opacity are no longer domestic governance failures  — they are external vulnerabilities. Implementing the February agreement’s labour commitments in a visible and verifiable manner would make it harder to sustain the forced-labour investigation.

Third, hold no illusions about what bilateral agreements with Washington can achieve. Bangladesh is not the primary target here — China’s goods trade surplus was nearly $1.2 trillion in 2025, about 70 percent of the global total; Vietnam’s bilateral surplus with the US hit $178 billion; Mexico’s reached $197 billion.

By comparison, US goods imports from Bangladesh totaled $9.5 billion in 2025, while the US goods trade deficit with Bangladesh was $7.1 billion. Yet in April 2025, Bangladesh faced a proposed tariff of 37 percent — steeper than Germany’s, higher than Japan’s, and above most of the world. The logic had little to do with Bangladesh’s bilateral relationship and everything to do with Washington’s domestic political imperatives.

The larger lesson is sobering. The US Supreme Court ruling may have restricted one route for presidential tariff action, but it did not make countries like Bangladesh immune from US trade pressure.

It merely redirected that pressure into more structured and perhaps more durable legal forms. While Section 301 is, in itself, not the tariff, it is the basis for future tariff action. Bangladesh would do well to recognise that now, before the next stage of pressure begins.

The writer is an economist and public affairs commentator whose work explores trade, development, governance, and democratic change in Bangladesh and beyond. He can be reached at: mgquibria.morgan@gmail.com