PPI Challenges Trump Administration’s ‘Structural Excess Capacity’ Investigation as Legally Flawed and Economically Unfounded

May 8, 2026
Ed Gresser

WASHINGTON (May 8, 2026) — The Progressive Policy Institute (PPI) today challenged the Trump administration’s Section 301 investigation into alleged “structural excess capacity” in 16 economies, arguing the probe misuses trade law, rests on economically unsound premises, and lacks evidence of the foreign government practices it purports to address.

Ed Gresser, PPI Vice President and Director for Trade and Global Markets, delivered the critique during a public hearing before the Section 301 Committee, testifying that senior administration officials have candidly stated the investigation’s true goal is to recreate tariff rates the Supreme Court invalidated in February on constitutional grounds, a purpose Section 301 was never designed to serve.

Gresser systematized three core defects in the USTR’s March 11 Federal Register Notice initiating the probe:

Misuse of Trade Law: Treasury Secretary Bessent explicitly stated the administration intends to use Section 301 to replace tariff revenue lost when the Supreme Court struck down tariffs imposed under the International Emergency Economic Powers Act. This goal is inconsistent with Section 301’s statutory purpose and raises fundamental separation-of-powers concerns, Gresser argued.
Incoherent Premise: The concept of “structural excess capacity,” defined as countries producing more goods than they consume domestically, is not economically abnormal or inherently problematic. Gresser noted that the U.S. itself exports far more aerospace products, almonds, and natural gas than Americans consume, citing Boeing’s delivery of 391 aircraft to overseas customers last year and American farmers’ export of over one million tons of almonds.
Unconvincing Data: The Federal Register Notice cites a global manufacturing capacity utilization rate of 75% as evidence of excess capacity. Yet the U.S. manufacturing sector itself operates at 75.2% utilization. Specific country examples – for example, complaints about Norwegian fish production, Cambodian clothing, and Bangladeshi cement – further illustrate the investigation’s illogic. Norway, with deep oxygen-rich fjords and a small population, naturally produces fish for world markets. Cambodia has comparative advantage in garment production, and maintains a long-term national trade deficit despite a bilateral surplus with the U.S. And Bangladesh’s cement industry, cited as an example of excess capacity, has never meaningfully exported cement to America at all and thus cannot burden U.S. commerce.

PPI does not support broad tariff increases as economic policy, noting that tariffs function as regressive taxes that disproportionately burden lower-income households and goods-intensive industries, including farming, manufacturing, and construction. Despite administration hopes that higher tariffs would expand U.S. manufacturing, the sector has shed jobs and lost economic share since 2024.

Read and download the testimony here.

Founded in 1989, PPI is a catalyst for policy innovation and political reform based in Washington, D.C. Its mission is to create radically pragmatic ideas for moving America beyond ideological and partisan deadlock. Find an expert and learn more about PPI by visiting progressivepolicy.org. Follow us at @ppi.

###

Media Contact: Ian O’Keefe – iokeefe@ppionline.org