DEFINITION of Section 232 of the Trade Expansion Act
Section 232 of the Trade Expansion Act of 1962, authorizes the President of the United States, through tariffs or other means, to adjust the imports of goods or materials from other countries if it deems the quantity or circumstances surrounding those imports to threaten national security. The Trade Expansion Act of 1962 was signed by President John F. Kennedy, who called it ,“…the most important piece of legislation, I think, affecting economies since the passage of the Marshall Plan.”
BREAKING DOWN Section 232 of the Trade Expansion Act
To conduct an investigation under Section 232 of the Trade Expansion Act of 1962, the Secretary of Commerce may self-initiate the investigation or an interested party may initiate an investigation through an application. Any investigation initiated must be reported to the Secretary of Defense which can also be consulted for information and advice should any policy questions arise during the investigation. The Department of Commerce reports its findings to the President within 270 days of initiating any investigation, with emphasis on whether certain imports threaten to impair the country's national security. The President has 90 days to formally concur or not with the report received from the Commerce department. If s/he concurs, his or her statutory authority under Section 232 allows him or her to modify or adjust the imports as necessary though tariffs or quotas. In effect, following the report submitted, the President of the country may take a range of actions, or no action, based on the Secretary's recommendations provided in the reports.
Since 1980, the Department of Commerce has conducted fourteen Section 232 investigations. In 2018, during the presidential term of Donald Trump, the Department found that the quantities and circumstances of steel and aluminum imports “threaten to impair the national security,” as defined by Section 232. President Donald Trump campaigned on the promise to renegotiate international trade deals on more favorable terms for the United States. As President, he has taken particular aim at the North American Free Trade Agreement (NAFTA), and the Trans Pacific Partnership (TPP). Following the report received from the Dept. of Commerce on January 11, 2018, the President announced tariffs on steel and aluminum imports. Wilbur Ross, the US Secretary of Commerce, reported that the excess production of steel and the present quantities of steel imports were, “…weakening our internal economy and shrinking [of our] ability to meet national security production requirements in a national emergency…” The department's report also stated that United States steel imports were nearly four times our exports, and that aluminum imports had risen to 90% of total demand for primary aluminum.
Thus, imports in this industry threatened to impair the national security.
On March 8, 2018, Trump exercised his presidential authority under Section 232 of the Trade Expansion Act of 1962 to impose a 25 percent tariff on steel imports and a 10 percent tariff on aluminum imports citing national security concerns. Ross had recommended in the investigation report:
- a global tariff of at least 24% on steel imports from all countries, or
- a minimum 53% tariff on steel imports from 12 countries including Brazil, China, Costa Rica, Egypt, India, Malaysia, Republic of Korea, Russia, South Africa, Thailand, Turkey, and Vietnam, or
- a quota on steel products from all countries equal to 63% of each country's 2017 exports to the U.S.
Canada and Mexico were granted exemptions from the tariffs, although those countries are facing additional tariffs on other goods and materials. The US Customs and Border Protection (CBP) agency began collecting the tariffs on March 23, 2018.
The United States is the largest importer of steel in the world. In 2017 the US imported 34.6 million metric tons of steel, a 15 percent increase from 2016, according to the US Commerce Dept. Those imports were worth nearly $30 billion. Canada represented 17 percent of those imports and Brazil accounted for 14 percent. China accounted for 2 percent and threatened to levy tariffs on hundreds of goods and materials that it imports from the US in retaliation.