API Error 400 "tool use concurrency issues" in large projects (400+ files)

Preflight Checklist

• [x] I have searched existing issues and this hasn't been reported yet
• [x] This is a single bug report (please file separate reports for different bugs)
• [x] I am using the latest version of Claude Code

What's Wrong?

Problem

Frequent "API Error: 400 due to tool use concurrency issues" in VSCode extension when working with large projects.

Environment

• Claude Code VSCode Extension
• macOS
• Project with 424 HTML files

Reproduction

1. Open project with 400+ files
2. Use any tool (Grep, Bash, Read, etc.)
3. Error appears randomly, even with single tool calls

Comparison

• Same setup in smaller projects (<100 files): No errors
• Same project, same tools: Errors occur

Suspected cause

Extension collects context (git status, file changes) for all files, causing parallel API load that exceeds concurrency limits.

What Should Happen?

Tool calls should work reliably regardless of project size.
A project with 400+ files should not cause API concurrency errors
when the user is only making single tool calls.

Expected: Single tool calls complete without "API Error 400
due to tool use concurrency issues"

The extension should queue or throttle internal context collection
(git status, file watchers, etc.) to avoid exceeding API concurrency limits.

Error Messages/Logs

API Error: 400 due to tool use concurrency issues.

Steps to Reproduce

1. Open VSCode with Claude Code extension (v2.1.19)
2. Open a project folder containing 400+ HTML files
3. Start a Claude conversation
4. Make a single tool call (e.g., Grep, Read, or Bash)
5. Error appears: "API Error: 400 due to tool use concurrency issues"
6. Retry same action → sometimes works, sometimes fails again

Note: Same actions in smaller projects (<100 files) work without errors.

Claude Model

None

Is this a regression?

I don't know

Last Working Version

_No response_

Claude Code Version

2.1.19 (Claude Code)

Platform

Anthropic API

Operating System

macOS

Terminal/Shell

VS Code integrated terminal

Additional Information

_No response_