US faces G20 pushback on excess capacity, forced labour as trade divisions widen

A majority of G20 countries have rejected or declined to support US efforts to address excess industrial capacity and “non-market” economic policies, highlighting divisions among the world’s major economies over trade and industrial policy, Reuters reported.

The US Trade Representative’s (USTR) office said on Friday that only a “handful” of G20 members supported a proposed pathway for cooperation on excess capacity. The issue has emerged as a major focus of the US G20 presidency this year, particularly amid Washington’s concerns over China’s industrial subsidies and export-driven manufacturing.

The divisions became clearer after a G20 trade ministers’ meeting in Milwaukee, where only Mexico and Argentina joined a US-led statement calling for greater cooperation to remove goods produced using forced labour from global supply chains.

The US administration has imposed tariffs of 10% or 12.5% on goods from 59 countries and the European Union, citing concerns that these jurisdictions are not adequately enforcing bans on forced labour. Washington is also conducting a second Section 301 investigation into 16 trading partners over signs of excess industrial capacity. The probe could result in additional tariffs in the coming months.

The USTR did not identify the countries that opposed the excess-capacity initiative. However, China has previously objected to similar language at a G20 finance leaders’ meeting in North Carolina. Beijing has rejected US and Western allegations that its industrial policies have created excess capacity, arguing that such claims are being used to justify protectionist trade measures.

“The draft ministerial statement was supported by all but a handful of members,” the USTR said, adding that several members “firmly rejected” creating a framework for cooperative action on excess capacity. The US G20 presidency said it was “severely disappointed” by the opposition.

Despite the disagreements, G20 trade ministers reached consensus on another issue: the weaponisation of food and agricultural trade. Members agreed that trade in food and agricultural inputs should not be used as an instrument of economic or political coercion.

The joint statement defined food weaponisation as measures intended to “slow, stop, block or direct the flow of food and agricultural inputs” to exert coercive pressure for unrelated geopolitical concessions.

“We condemn food weaponization, as it poses a significant humanitarian and economic threat,” the ministers said.

The trade discussions came amid wider US pressure on allies over energy prices. After pressure from President Donald Trump, including a threat to restrict US diesel exports, G7 countries agreed on Friday to release about 100 million barrels of diesel reserves in an effort to bring down record-high US diesel prices. Diesel is widely used in agriculture and other industrial activities.

WTO tariff rules

US Trade Representative Jamieson Greer also said he did not seek a joint statement on reforming the World Trade Organization’s most-favoured-nation (MFN) system, which provides the basis for published, unconditional tariff rates.

Greer has argued that the MFN principle does not adequately address economies that provide industrial subsidies, particularly China. The US said some G20 members were open to considering changes, including broader exceptions and new legal interpretations that could allow greater use of existing provisions.