Trump raises China’s stake with Section 301 trade probe ahead of Beijing Xi meeting

With a high-level summit less than three weeks away in Beijing, the US has launched sweeping trade investigations that have put China in its crosshairs, adding a new layer of friction to an already complicated relationship.

Investigations, conducted under Section 301 of the Trade Act of 1974, aim to identify unfair trade practices, particularly structural excess capacity and production in manufacturing sectors.

The 301 probe, while casting a wide net over a dozen trading partners, takes clear aim at China, given its well-documented problems such as overcapacity and forced labor, said Dan Wang, China director of political consultancy Eurasia Group.

With Trump’s negotiating position weakened by the military offensive in Iran, “the US needs to establish a credible threat on tariffs as they remain Trump’s top pressure tool,” Wang said, although Beijing was not surprised by the escalation.

“Increasing leverage before important bilateral meetings is now a standard move,” he said.

The investigations followed the US Supreme Court’s decision last month to strike down Trump’s “reciprocal” tariffs, which curtailed his ability to deploy tariffs at will, giving China a boost in leverage ahead of the summit.

The Trump administration is “turning to its other tools to pursue its tariff agenda … (the tariff) is clearly a card that Trump wants to have in his pocket for negotiations,” said Lin Song, chief economist at ING Bank.

Section 301 allows the president to impose tariffs on countries that engage in unfair trade practices without congressional approval. Trump has repeatedly accused China of engaging in unfair trade practices dating back to his first term as president when he imposed Section 301 and tariffs.

Meanwhile, despite criticism from global trading partners, including the US, against over-reliance on external demand, China’s export machine continues to run full throttle. Chinese exports rose 21.8% in the first two months, pushing its trade surplus to a record $213.6 billion.

The trade probes are adding fresh uncertainty to an already complicated diplomatic backdrop and fueling a fragile trade deal between the world’s top two economies, widening the gap between the two sides’ agendas for the summit.

“It’s unclear what’s on the table for discussion from both sides, and a summit is coming soon,” said Deborah Elms, head of trade policy at the Hinrich Foundation.

“If additional investigations targeting forced labor practices are launched and China is named … Beijing will become even more aggravated and unwilling to deal with the administration … at least less than stable,” he told CNBC’s “The China Connection” on Thursday.

The probe comes at a time when US actions against Iran have put China’s energy supplies at risk, further complicating Beijing’s calculus for bilateral talks.

Although China is temporarily insulated from strategic oil and gas reserves, it is not immune to long-term supply chain disruptions emanating from the Strait of Hormuz, said Alfredo Montufer-Helu, managing director of Ankura Consulting in Beijing.

“A volatile external environment is the exact opposite of what policymakers in Beijing want right now,” Montufer-Helu said.

The US and Israeli strikes that killed Iran’s supreme leader Ayatollah Ali Khamenei have drawn widespread retaliation from Tehran, which has moved to choke off the Strait of Hormuz – a waterway that carries roughly a fifth of the world’s oil supply.

As a major buyer of Iranian crude, China has sent a special envoy to the region to mediate, demanding an immediate ceasefire and a return to diplomatic talks.

Trump will meet his Chinese counterpart Xi Jinping in China from March 31 to April 2, the first trip by a US president since Trump’s last visit in 2017. Trade negotiators from both sides will reportedly meet in mid-March to lay the groundwork for the leaders’ summit.

The meeting is expected to yield limited progress, with both sides trying to maintain the stability that has characterized bilateral relations since late last year.

“We should not expect a fundamental reconstruction of the bilateral relationship,” Montufer-Helu said. “Maintaining the stability achieved in Busan would be the best outcome in itself.”

Chinese Foreign Minister Wang Yi struck a conciliatory tone at a press conference on Sunday, saying both sides should “create a suitable environment” for the summit and “remove unnecessary obstacles”.

According to analysts, Washington is likely to push for expanded commitments on agricultural purchases, including soybeans and aircraft, as well as assurances that China will not restrict its rare earth exports.

Elms said the two leaders are expected to frame the meeting as the start of a longer conversation for the rest of 2026, with the delivery narrowed to commercial purchases like soybeans rather than any grand bargain.

China, for its part, wants clarity on the trajectory of US technology export restrictions. “Beijing is basically asking how high the fence gets and how big the yard is,” Montufer-Helu added.

The prospect of US executives accompanying Trump on his trip to Beijing appears to be fading, indicating how expectations for the summit have backfired.

“With each passing day, the chances of a formal CEO delegation joining the president’s trip are fading,” Han Lin, Asia Group’s China country director, told CNBC on Thursday. “Some CEOs have been invited, and even fewer have agreed to come because of the short time left.”