Introduction

On March 11–12, 2026, the Office of the U.S. Trade Representative initiated two separate Section 301 investigations. The first investigation, initiated on March 11th, targets structural excess capacity and production in manufacturing sectors across 16 economies, including Taiwan. The second, initiated on March 12th, examines 60 economies — again including Taiwan — based on  their failure  to impose and effectively enforce bans on importing goods made with forced labor. In both investigations, USTR has invited public comments on whether the acts, policies, and practices identified in the respective Federal Register notices are unreasonable or discriminatory and whether they burden or restrict U.S. commerce.

As a general matter, Taiwan is a key strategic trading partner of the United States, grounded in shared democratic values and a robust market-based economy. In particular, Taiwan’s exports, including the advanced semiconductors and other emerging technological items, are vital to the United States’s technological advancement, economic competitiveness, and national security. Negative findings in both Section 301 investigations will be damaging to the United States’ goals for an industrial renaissance and, ultimately, detrimental to the nation’s economic health.

Section 301 Investigations relating to Structural Excess Capacity and Production in Manufacturing Sectors 

In the initiation notice, USTR stated that key trading partners have developed excess production capacity disconnected from actual demand. The general idea is that this structural excess capacity, driven by government policies that support underutilized industrial output, leads companies to inefficiently maintain or expand unused capacity. USTR cited indicators such as trade surpluses, low capacity utilization, sector overcapacity, and unprofitable firms, and attributed them to seven policy interventions: production subsidies, wage suppression, state-owned enterprise activities, market access barriers, lax environmental or labor protections, subsidized lending, and currency manipulation. These practices have contributed to persistent U.S. trade deficits with these partners and hinder efforts to bring supply chains back home and create quality jobs for Americans. In Taiwan’s case, USTR points out that Taiwan’s excess capacity is evidenced by large or persistent trade surpluses, citing a goods trade surplus of $73.3 billion in 2024. 

Indeed, Taiwan maintains a global goods trade surplus, mainly driven by exports of semiconductors, electronic products, information technology, and machinery. U.S. trade data show that Taiwan’s top four export items to the U.S. are semiconductors, accounting for 65% of Taiwan’s total exports to the United States (See Appendix 1). While DSET agrees that excess production capacity, driven by government policies, distorts global markets and essentially is an unfair trading practice, trade surpluses are not, by themselves, indicative of excess capacity. Rather, integration into global value chains and demand-driven forces could also cause trade surpluses. 

This is exactly the case with Taiwan. Specifically, Taiwan’s surplus reflects specialization in the semiconductor sector and is driven by demand, due to a legitimate comparative advantage in semiconductors – the U.S. endeavor to build up its AI industry as the main driver.  This demand-side force is neither unreasonable nor discriminatory to the U.S. market. Instead, Taiwan’s exports, especially semiconductors and other emerging technology products, are crucial to U.S. supply chain security and to sustaining  the U.S. technological edge over the PRC. Imposing Section 301 tariffs in this case will be detrimental to the U.S. tech industry, which relies on Taiwan’s advanced semiconductors for their manufacturing capabilities and service outputs. 

Moreover, the Agreement between the United States and Taiwan – AIT-TECRO Agreement on Reciprocal Trade (“ART”), signed in February 2026, reflects U.S. recognition of Taiwan as a trusted economic partner whose trade practices align with American interests. ART’s binding provisions on supply chain transparency, export control coordination, and investment security screening further show that Taiwan is actively supporting U.S. efforts to secure critical supply chains. That makes Taiwan fundamentally different from the state-directed overcapacity Section 301 investigations are meant to address. 

Finally, an affirmative determination and tariff actions against Taiwan directly conflict with the United States’ own goals for reshoring and supply chain security. The United States already received the largest foreign direct investment in U.S. semiconductor history through Taiwan’s TSMC foundries in Arizona foundry plants and other Taiwanese suppliers in the semiconductor industry. As demonstrated in ART, Taiwan further agrees to additional investment in the United States. Another word, Taiwan’s semiconductor industry actively supports the administration’s reshoring efforts and creates quality jobs for Americans. Subjecting Taiwan to an affirmative finding under Section 301 will destabilize the semiconductor supply chain ecosystem and be harmful to these new investments in the U.S. semiconductor industry.

Section 301 Investigation Relating to the Import Ban on Forced Labor Products

In this investigation, USTR states that allowing goods made with forced labor into their supply chains and importing products from these economies could harm U.S. workers and citizens by skewing competition and encouraging the purchase of goods produced under exploitative conditions, because U.S. domestic producers will have to compete with foreign goods that have an artificial cost advantage. Ultimately, the United States aims to incentivize its trading partners to remove products produced with forced labor from their supply chains and claims that failure to adopt such bans may harm U.S. commerce. . 

First, Taiwan shares the United States’ goal of eliminating products made with forced labor from its supply chain and is committed to this shared objective as demonstrated in the ART.  In particular, Taiwan agrees to (1) adopt and effectively implement a prohibition on importation of goods mined, produced, or manufactured wholly or in part by forced or compulsory labor; (2) recognize determinations of U.S. authorities on entities under 19 U.S.C. § 1307; and (3) presumptively prohibit imports from designated entities. 

Secondly, under ART, Taiwan not only commits to enacting legislation and enforcing a ban on goods produced with forced labor but also goes beyond measures outlined in the Section 301 investigation by aligning its trade regulations with the U.S. framework. This includes establishing procedures to implement its own enforcement of the U.S. Uyghur Forced Labor Prevention Act (“UFLPA”) Entity List determinations. Consequently, Taiwan’s import ban will be operationally linked to Customs and Border Protection enforcement decisions and the UFLPA Entity List. No other economy subject to this investigation has committed to such a deep regulatory alignment with U.S. enforcement structures. What Taiwan has commuted to meets the stated goal of this Section 301 investigation.

Finally, ART, signed at the end of February this year, is a bilateral treaty-level commitment between Taiwan and the United States. Its provision provides an enforcement mechanism for non-compliance. Taiwan’s commitment and shared goal is binding under international law – no other economies named in this investigation have shown this level of endeavor. 

Conclusion

Subjecting Taiwan to punitive tariffs in these two investigations would not only risk disrupting a bilateral economic relationship that Washington itself has invested in institutionalizing, but would also send a discouraging signal to democratic, market-based partners whose cooperation is essential to U.S. supply chain resilience. At a moment when the United States is actively seeking to diversify away from strategic dependency on non-market economies, taking punitive actions against Taiwan would undercut the very friendshoring architecture the ART was designed to build.