By R. Suryamurthy
The United States has opened a new front in its long-running effort to police global trade. This time, the focus is not only on China—its usual adversary—but on a much broader set of economies, including India, whose industrial ambitions are beginning to reshape the global manufacturing map.
Washington’s decision to launch investigations under Section 301 of the Trade Act of 1974 formally rests on a familiar allegation: that government policies in foreign economies are creating industrial “excess capacity” that harms American producers. Sixteen economies are now under scrutiny, and the list of sectors reads like a strategic inventory of the modern economy—steel, solar modules, semiconductors, batteries, chemicals, machinery and automobiles.
Yet the language of trade law often hides the political reality underneath. Trade investigations rarely appear in isolation; they tend to emerge at moments when domestic political calculations, legal constraints and geopolitical competition intersect. This one is no exception.
Trade economist Biswajit Dhar has been unusually blunt in describing the process. The hearings announced under the investigation, he argues, resemble a “kangaroo court,” where written submissions and testimonies risk becoming little more than ritualistic steps toward an outcome that may already be politically convenient. His remark may sound provocative, but the unusually compressed timeline of the probe—clearly structured to conclude before temporary U.S. tariffs expire in July—raises uncomfortable questions about the purpose of the exercise.
To understand why Washington has reached for Section 301 again, one must look at the legal setback that preceded it.
Earlier this year, the administration of Donald Trump suffered a major blow when the U.S. Supreme Court struck down the legal foundation of its “reciprocal tariff” regime. That policy had allowed Washington to impose country-specific tariffs in order to pressure trading partners into concessions during negotiations. It was a blunt instrument, but an effective one. For the White House, it provided immediate leverage in trade diplomacy. The court ruling dismantled that tool overnight.
In response, Washington introduced a temporary measure: a flat 10 percent tariff on imports under Section 122 of the Trade Act. But that provision was never intended as a permanent replacement. It expires on July 20. The challenge facing U.S. trade officials since the court ruling has therefore been straightforward—how to maintain pressure on trading partners without the legal authority the reciprocal tariff regime once provided. Section 301 investigations offer precisely such a pathway.
Unlike the reciprocal tariff system, they require hearings, written submissions and consultations with affected governments. They are framed as evidence-driven processes designed to determine whether foreign policies harm American commerce. But once the investigation reaches its conclusion, Washington retains the same power it had before: the ability to impose tariffs or other trade restrictions. In effect, the procedural complexity of Section 301 provides legal cover for an outcome that may ultimately look very similar to the previous tariff strategy.
For India, the investigation arrives at a moment when its industrial policy is becoming more visible—and therefore more vulnerable—to external scrutiny. Over the past decade, New Delhi has attempted to rebuild its manufacturing base through a combination of incentives, tariff protections and targeted industrial policy. The government’s production-linked incentive schemes have sought to encourage companies to manufacture electronics, solar equipment, pharmaceuticals, automobiles and advanced chemicals within India rather than importing them.
The rationale behind this strategy is rooted in experience. For years, India struggled with a persistent trade deficit in manufactured goods and an overdependence on imports from China and other East Asian economies. The pandemic-era supply chain disruptions reinforced the perception that excessive reliance on foreign manufacturing created economic vulnerabilities. Industrial capacity, in this context, came to be seen not merely as an economic objective but as a strategic necessity.
Factories began to appear across sectors. Solar manufacturing offers the most visible example of how quickly the landscape has shifted. India’s solar module production capacity has surged to roughly 144 gigawatts—a dramatic rise from the modest levels seen a decade ago. Domestic installations, however, remain closer to 45 to 50 gigawatts annually.
This imbalance between capacity and demand is often presented as evidence of “excess capacity.” In reality, it reflects a deliberate policy decision. Indian policymakers have sought to build an industry capable of serving global markets rather than merely domestic demand. As renewable energy adoption accelerates worldwide, New Delhi hopes its manufacturers will compete in export markets currently dominated by Chinese firms. Industry projections suggest that solar module capacity could approach 200 gigawatts within a few years as new plants come online.
Steel provides another illustration of the scale of India’s industrial ambitions. The country’s installed crude steel capacity has crossed roughly 200 to 235 million tonnes annually, making India the world’s second-largest steel producer after China. Yet the government’s ambitions extend much further. Under the National Steel Policy, India aims to raise steelmaking capacity to around 300 million tonnes by 2030.
Achieving that target will require the addition of roughly 100 million tonnes of new capacity and investments estimated at more than $150 billion. Large integrated plants are already being planned or expanded in several states, reflecting the government’s expectation that domestic infrastructure demand will continue to surge.
From New Delhi’s perspective, this expansion is tied directly to the needs of a rapidly developing economy. Infrastructure corridors, urban housing programmes, railway expansion and renewable energy projects all require enormous quantities of steel and industrial equipment. Building domestic capacity ensures that these projects are not dependent on imports.
Washington, however, tends to interpret such expansions through the lens of global market dynamics. The concern among U.S. policymakers—shaped by earlier trade conflicts with Japan and later China—is that state-supported industries can generate production capacity that eventually exceeds domestic consumption. When that happens, the surplus is exported abroad, often at prices that undermine producers in other countries.
Solar panels, steel, petrochemicals, electronics and automobiles—the sectors now under investigation—are precisely the industries where such fears tend to emerge. Yet the argument carries a certain irony in today’s geopolitical environment.
Industrial policy is no longer a controversial exception within the global trading system. It has become the dominant economic strategy among major powers. The United States itself has adopted large-scale subsidy programmes to rebuild domestic supply chains in semiconductors, electric vehicles and clean energy technologies. Europe is doing the same through its green transition agenda. Across Asia, governments have long supported strategic industries through a mixture of incentives and protection. In other words, state intervention in industrial development has become the rule rather than the exception.
The difference lies in who exercises that intervention. When Washington subsidises domestic semiconductor production or electric vehicle manufacturing, it is framed as economic revitalisation. When other countries pursue similar strategies, the language often shifts toward concerns about “excess capacity” and trade distortions.
Trade policy analyst Ajay Srivastava of the Global Trade Research Initiative has argued that the investigation should also be viewed within the broader context of ongoing trade negotiations between the United States and several major economies. A number of the countries now under scrutiny—including Japan, South Korea and the European Union—have recently concluded trade arrangements with Washington. Others, including India, remain in the process of negotiating market access and tariff adjustments.
Trade investigations have long functioned as instruments of negotiation as much as legal processes. They signal pressure without immediately imposing penalties, creating an environment in which trading partners may feel compelled to offer concessions.
India’s challenge in this environment is therefore not simply economic but diplomatic. New Delhi must defend its industrial policies while maintaining a constructive relationship with the United States, which remains one of its most important trading partners and strategic allies. The balancing act is complicated by the fact that India’s manufacturing ambitions increasingly intersect with sectors that Washington considers strategically sensitive. There is also a deeper structural issue at play.
For decades, developing economies were encouraged to integrate into global manufacturing networks, expand industrial capacity and compete in international markets. The promise of globalisation rested partly on the idea that industrialisation would spread beyond a handful of advanced economies.
India appears to be following that script—building factories, expanding supply chains and seeking a larger role in global production. Yet the moment those ambitions begin to materialise, the rules of the system appear to shift.
The debate is no longer simply about tariffs or market access. It has moved toward questions about subsidies, industrial strategy and the scale of manufacturing capacity itself. The Section 301 investigation launched in Washington will unfold over the coming months through hearings, submissions and consultations. It may eventually lead to tariffs, or it may quietly fade into negotiated compromises.
But the broader signal is unmistakable. Global trade politics is entering a phase where industrial power—not just comparative advantage—defines the terms of competition. Countries are no longer merely trading goods; they are competing to build the factories that produce them.
India’s manufacturing expansion has placed it squarely within that contest. And as its factories grow—from solar plants to steel mills—it is discovering that industrial success rarely goes unnoticed in the geopolitics of trade. (IPA Service)
