The Administration Is Using Section 301 to Fight Unfair Trade Practices in Manufacturing: It Should Do the Same for Digital Protectionism

On March 11, the Office of the U.S. Trade Representative launched sweeping Section 301 investigations into structural excess manufacturing capacity across 16 economies, including China, the EU, Japan, Korea, and India. The investigations target foreign policies that have led to overproduction in sectors ranging from steel and semiconductors to batteries and robotics, displacing U.S. domestic production and undermining American competitiveness. These investigations are a welcome step, even if the main culprit by far is China—and that the investigation itself is largely motivated to replace the now-unlawful IEEPA tariffs.

But manufacturing overcapacity is not the only unfair trade practice threatening U.S. economic strength. Many foreign governments are also waging a sustained campaign of discriminatory digital regulations against leading American technology companies, and the administration should use Section 301 investigations to press those countries to change course.

The reasoning behind the manufacturing investigations is straightforward: when foreign governments sustain production capacity that exceeds demand through subsidies, currency manipulation, and market distortions, the resulting overproduction floods markets and displaces foreign firms, including American firms. Section 301 authorizes USTR to investigate and respond to foreign practices that are unreasonable or discriminatory and burden U.S. commerce.

The rationale for using Section 301 extends beyond manufacturing overcapacity. While the manufacturing investigations focus on subsidized overproduction that displaces U.S. firms, a parallel set of unfair practices in digital markets warrants the same enforcement tool. In the digital arena, the mechanism is different—foreign governments are not subsidizing rival production but rather imposing regulations and taxes that single out American technology companies for disproportionate burdens—but the result is the same: U.S. commerce is unreasonably burdened by foreign government action.

Governments around the world are deploying policies that function as non-tariff attacks (NTAs) on U.S. technology companies. These are not legitimate consumer protection measures. They are discriminatory regulations and taxes, precision-engineered through revenue thresholds, gatekeeper designations, selective enforcement, digital services taxes, forced data localization, mandatory payments to domestic media companies, and compelled technology transfers, to target a handful of American firms while often exempting domestic and Chinese competitors.

ITIF has documented more than 100 such policies across dozens of countries, spanning digital services taxes, discriminatory competition regimes like the EU's Digital Markets Act, forced data localization, exorbitant fines, interoperability mandates, mandatory media payment schemes, content moderation regimes, local content quotas, network usage fees, and sovereign cloud requirements.

The case for launching comprehensive Section 301 investigations into digital NTAs is clear. The digital trade chapter of the USMCA provides a useful baseline for the principles such an investigation should vindicate: nondiscriminatory treatment of digital products, prohibitions on forced data localization, protections for cross-border data transfers, and safeguards for source code and proprietary algorithms. At a minimum, such an investigation should examine the EU's DMA and DSA, whose designations disproportionately capture U.S. companies; discriminatory GDPR enforcement patterns; digital services taxes and mandatory media payment schemes, such as Australia's News Media Bargaining Code and Canada's Online News Act; data localization and sovereign cloud requirements; forced interoperability, technology transfers, and algorithm disclosure mandates; content moderation regimes with disproportionate compliance burdens; local content quotas; and network usage fees that function as market access barriers.

The goal is not to deny countries the right to regulate their digital markets. It is to ensure that they apply regulations evenhandedly, not designed from the outset to disadvantage a small number of U.S. firms.

The administration has already signaled that it understands this threat. President Trump has stated that digital taxes and digital markets regulations “are all designed to harm, or discriminate against, American Technology” and “give a complete pass to China’s largest Tech Companies.” Commerce Secretary Lutnick has pressed European counterparts to reassess EU digital regulations. The recent Korea Strategic Trade and Investment Deal includes a commitment that U.S. companies will not face discrimination in digital services policy. USTR has already used Section 301 to investigate digital services taxes in 2019, but those inquiries were narrowly scoped to a single category of NTA, and retaliation was ultimately suspended in favor of multilateral tax negotiations that have yet to produce results. What is needed now is a comprehensive investigation addressing the full spectrum of discriminatory digital policies.

These are important steps. But diplomatic pressure and trade deal language alone are not sufficient. Even countries that have committed to nondiscrimination continue to pursue new discriminatory policies. Section 301 provides the enforcement mechanism to back up those commitments with credible consequences.

The administration has demonstrated its willingness to use Section 301 to address unfair foreign trade practices in manufacturing, including as a basis for replacing IEEPA tariffs with a durable legal foundation. It should apply that same resolve to protect American technology leadership. The companies targeted by digital NTAs collectively invest more than $200 billion annually in R&D and are critical to America’s ability to compete with China in the technologies that will define economic and military power in the coming decades. A digital Section 301 investigation would send a clear message: discriminatory digital regulations will be met with the same enforcement response as any other unfair trade practice.