What Is 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.”
- The Trade Expansion Act of 1962 was passed to promote the general welfare, foreign policy, and security of the United States through international trade agreements.Section 232 of the Act allows the president of the United States to impose tariffs through executive action, bypassingcongress under certain circumstances.
- President Trump famously utilized Section 232 to begin a series of tit-for-tat tariffs with global exporters leading to trade wars with nations around the world, and in particular China.
How Does Section 232 of the Trade Expansion Act Work?
To investigate 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, who can also be consulted for information and advice should any policy questions that arise during the investigation.The Department of Commerce reports its findings to the President within 270 days of initiating any investigation, with an emphasis on whether or not certain imports threaten to impair the country's national security. The President has 90 days to concur formally or not with the report received from the Commerce Department. If they concur, their statutory authority under Section 232 allows them to modify or adjust the imports as necessary through 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.
Section 232 and Free Trade Agreements
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. Donald Trump had campaigned on the promise to renegotiate international trade deals on more favorable terms for the United States. During his term as President, he took 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, President Trump announced tariffs on steel and aluminum imports. Wilbur Ross, the U.S. 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 of the U.S.
Section 232 and the Trump Administration
On March 8, 2018, Trump exercised his presidential authority under Section 232 of the Trade Expansion Act of 1962 to impose a 25% 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 U.S. 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 U.S. imported 34.6 million metric tons of steel, a 15% increase from 2016, according to the U.S. 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 U.S. in retaliation.