By: Charlie Chung
Published on: January 25, 2024
In 2017, quoting then-President Donald Trump, the White House criticized how the expansion of the liberal economic system has failed to liberalize the economic and political practices of those countries that refuse to recognize the economic and political values of global institutions.[1] The crux of this criticism is that the United States liberalized its own economic trading system for the past seven decades while hoping in vain that the United States’ adversaries would also liberalize their economic and political systems.[2] Reflecting such criticism against multilateralist liberalization, the Trump administration announced that one of its trade policy objectives is preventing trading partners and the World Trade Organization (“WTO”) from interpreting the rules in a way that could harm the United States.[3] However, such anti-multilateralism, which still exists in the United States’ trade policy, inevitably harms domestic consumers and downstream industries.
Against the backdrop of anti-multilateralism, the Trump administration imposed a 25 percent tariff on imported steels[4] and a 10 percent tariff on imported aluminums to protect America’s national security, pursuant to Section 232 of the Trade Expansion Act of 1962 (“Section 232”).[5] The Section 232 tariffs was levied based on the Secretary of Commerce’s finding that global overproduction of steel[6] and aluminum threaten to impair national security.[7] The Commerce Department’s investigation report claimed that the global overproduction reduced the availability of domestic steels and aluminums needed by national defense industries.[8] The Department of Commerce also warned that if foreign suppliers abruptly decide to cut their supplies, the underproduction and the weakened state of domestic production capacity will make the United States vulnerable, when the domestic supply will be in urgent need, such as in wartime.[9]
Section 232 is a powerful policy tool that provides the President sole discretion to determine the nature and duration of the action against subject imports, provided that the Department of Commerce’s investigation affirmatively finds that imports of the subject goods threaten to impair national security.[10] Congress passed Section 232 in the midst of the Cold War, and anticommunist sentiments motivated legislators and the executive branch to grant the President broad powers to unilaterally execute protectionist measures in order to support troop deployments abroad.[11] There is no substantial check on the President’s power under Section 232, other than procedural requirements, such as that the President must first have the Commerce Secretary investigate and diagnose the validity of national security concerns.[12]
The steel and aluminum tariffs remain controversial as these measures are still in place under the Biden administration, and there has been no major changes made other than replacing the tariffs against the European Union, the United Kingdom, and Japan with quotas.[13] Moreover, with respect to economic impacts, the Peterson Institute for International Economics estimated that every job created by the Section 232 tariffs would cost about $650,000 because in 2018, the tariffs would raise the steel industry’s aggregate income by about $2.4 billion and create about 8,700 jobs, while raising consumer steel costs by about $5.6 billion.[14]
The steel and aluminum tariffs decreased imports and increased domestic products, but consumers are bearing a heavy cost with downstream industries damaged by the tariffs.[15] According to a 2023 report by the United States International Trade Commission, between 2018 and 2021, the steel tariffs reduced the imports by 24 percent, increased the price of steel products in the United States by 2.4 percent, and increased the domestic production by 1.9 percent.[16] Similarly, for the same period of time, the aluminum tariffs decreased the imports by 31 percent, increased the price of aluminum products by 1.6 percent, and increased the domestic production by 3.6%.[17] The report also concluded that the increase in the price and the decrease in imports damaged downstream steel and aluminum industries by decreasing their production by $3.48 billion in 2021.[18]
Various domestic importers filed lawsuits against the United States to seek relief, but courts thus far have ruled for the United Sates because Section 232 explicitly permits the President — after receiving the Commerce Department’s investigation report — to adjust imports if the president discretionarily believes that excessive imports are found to be a threat to national security of the United States.[19] Most recently, on March 27, 2023, the Supreme Court refused to hear a case that the United States Court of Appeals for the Federal Circuit ruled against steel importers.[20] The Supreme Court’s denial of the petition by USP Holdings, Inc. and other parties ended the litigation and solidified the lower court’s determination that the President has broad discretionary power to adjust imports under Section 232.[21]
On the other hand, a WTO Panel found on December 9, 2022 that the Section 232 tariffs are not in conformity with the United States’ obligations under the General Agreement on Tariffs and Trade 1994 (“GATT”).[22] On the same day of the Panel decision, however, the Office of the United States Trade Representative (“USTR”) criticized the Panel decision and said that the Biden Administration will not remove the Section 232 measures in place because WTO cannot “second-guess the ability of a WTO Member to respond to a wide-range of threats to its security.”[23] The Biden administration’s unwillingness to comply with the Panel report indicates that the executive branch is unlikely to treat the compliance with WTO rules as a significant factor in considering whether to impose or to make adjustments to Section 232 tariffs.[24]
Section 232 is an anachronistic statute that permits the President to define national security threat and to discretionarily restrict imports.[25] Section 232 needs an update because Congress passed the statute when national security issues had to be prioritized over economic issues.[26] Without an update, Section 232 is a dangerous tool that can cause the Executive Branch’s abuse of its discretion. Indeed, reacting to national security threats with import restrictions is likely a better alternative than an actual war. However, in the absence of a genuine national security threat, Section 232 actions will likely do nothing but to cause inefficiency in our economy by hurting consumers and downstream industries with diminished imports.
[1] See The White House, National Security Strategy of the United States of America, Dec. 18, 2017, at 17.
[2] See id. (emphasizing that the adversaries benefited under the expansion of economic liberalization without reforming their economic or political values).
[3] See Office of The U.S. Trade Representative, 2017 Trade Policy Agenda and 2016 Annual Report of the President of the United States on the Trade Agreements Program, Mar. 1, 2017, at 2.
[4] See Proclamation No. 9705, 83 Fed. reg. 11,625 (Mar. 8, 2018).
[5] See Proclamation No. 9704, 83 Fed. reg. 11,619 (Mar. 15, 2018).
[6] See U.S. Dep’t of Commerce, The Effect of Imports of Steel on the National Security (2018).
[7] See U.S. Dep’t of Commerce, The Effect of Imports of Aluminum on the National Security (2018).
[8] See U.S. Dep’t of Commerce, supra note 8, at 2-5; U.S. Dep’t of Commerce, supra note 9, at 23-60.
[9] See U.S. Dep’t of Commerce, supra note 8, at 2-5.
[10] 19 U.S.C. § 1862(b)(1)(A)(ii).
[11] See David McConnell, Slippery Slope? More like Sliding Scale: Reviving Section 232 Litigation by Adopting Sliding Scale Analysis to Meaningfully Constrain Presidential Action, 31 Fed. Cir. B.J. 145, 148-53 (2022)
[12] See Transpacific Steel LLC v. United States, 415 F. Supp. 3d 1267, 1275 (Ct. Int’l Trade 2019).
[13] See Alex Durante, How the Section 232 Tariffs on Steel and Aluminum Harmed the Economy, Tax Foundation (Sep. 20, 2022), https://files.taxfoundation.org/20220926134316/How-the-Section-232-Tariffs-on-Steel-and-Aluminum-Harmed-the-Economy-2.pdf?_gl=1*1r9wlvm*_ga*OTAzODk1MzEzLjE2ODE3ODc5Mzc.*_ga_FP7KWDV08V*MTY4MjEwMTY5NS4zLjAuMTY4MjEwMTgwNi42MC4wLjA.
[14] See Gary Clyde Hufbauer and Eujin Jung, Steel Profits Gain, but Steel Users Pay, under Trump’s Protectionism (Dec. 20, 2018), https://www.piie.com/blogs/trade-and-investment-policy-watch/steel-profits-gain-steel-users-pay-under-trumps.
[15] See U.S. Int’l Trade Comm’n, Economic Impact of Section 232 and 201 Tariffs on U.S. Industries 79-80 (2023).
[16] See id. at 19-20.
[17] See id.
[18] See id. at 118.
[19] See e.g. USP Holdings, Inc. v. United States, 36 F.4th 1359 (Fed. Cir. 2022)
[20] See Jennifer Doherty, Supreme Court Declines Steel Tariff Challenge, Law 360 (Mar. 27, 2023, 3:52 PM), https://www.law360.com/articles/1590317.
[21] See id.
[22] See Panel Report, United States – Certain Measures on Steel and Aluminum Products, ¶ 8.2, WTO Doc. WT/DS544/r (adopted Dec. 9, 2022) [hereinafter Section 232 Panel Report].
[23] See id. (stating that the United States will not cede to the WTO Panel decision as essential security concerns are at stake).
[24] See id.
See e.g. USP Holdings, Inc. v. United States, supra note 24. I don’t think you can supra a case
[25] See Scott Lincicome & Inu Manak, Protectionism or National Security? The Use and Abuse of Section 232, Cato Institute (Mar. 9, 2021), https://www.cato.org/policy-analysis/protectionism-or-national-security-use-abuse-section-232 (emphasizing that Section 232 lacks an objective definition of “national security,” which permits essentially anything to be considered a threat).
[26] See H.R. Rep. No. 87-2518, at 4-7 (1962) (Conf. Rep.).