Section 232 Tariffs

Section 232 of the Trade Expansion Act of 1962 provides the President with authority to restrict imports for national security purposes. While rarely used, the Administration has recently used Section 232 to impose tariffs on imported steel and aluminum.

Steel and aluminum global overcapacity should be addressed. However, using “national security” arguments under Section 232 of the Trade Expansion Act of 1962 to restrict imports undermines the United States’ ability to coordinate and institute sustainable trade reform.

Tariffs on steel and aluminum will cost the U.S. more jobs than it will gain in steel and aluminum industries by a ratio of 16 to one, or a net loss of 400,000 total jobs.

In Congressional testimony, Business Roundtable President and CEO Joshua Bolten cited four reasons why Business Roundtable opposes the Section 232 tariffs on steel and aluminum imports:

1. Increased Cost to Consumers

The tariffs that have been placed on steel and aluminum imports will have a downstream effect on products and consumers. Steel and aluminum are key manufacturing materials for a variety of products and everyday items. The tariffs will naturally increase the cost of production which will raise the price of the finished good. This will directly impact American families as everyday goods and products will become less affordable.

2. Loss of Competitiveness

The steel and aluminum tariffs will raise production costs for U.S. companies and as a result, will make U.S. companies and products less competitive domestically and internationally. Since the tariffs will increase the cost of a finished good, it will make U.S. products more expensive and less attractive, compared to those of foreign competitors.

3. Retaliation Against America’s Exporters

As a result of the steel and aluminum tariffs, U.S. trade partners have responded or are in the process of enacting retaliatory tariffs. On June 5, 2018, Mexico imposed tariffs on about $3 billion worth of U.S. products, including steel, cheese, apples, and bourbon. Canada and the European Union are in the process of following with their own retaliatory tariffs. If the automobile tariff goes into effect, the retaliatory tariffs from other countries will only increase. This will ultimately distance the United States from its closest trading partners and has the potential to start a trade conflict that will harm U.S. economic interests.

4. Misuse of National Security Designation

Section 232 is intended to be used to combat real national security threats—not as an excuse to be used to raise blanket tariffs on other countries The national security purpose of restricting steel and aluminum imports from our closest allies in not at all clear. In a Defense Department memo, Secretary of Defense wrote, “DOD does not believe that the findings in the [Commerce Department’s] reports impact the ability of DOD programs to acquire the steel or aluminum necessary to meet national defense requirements.

The administration’s decision to use Section 232 and expand the definition of national security to defend their action, also sends the message to other countries that they can do the same. This positions the United States to be taken advantage of by other countries who have been looking for a way to bypass international trade rules.

Business Roundtable Congressional testimony also warned that Section 232 tariffs on autos would dramatically escalate a dangerous approach in U.S. trade policy with serious negative economic consequences. 

Business Roundtable suggested that Congress assert its constitutional authority for when a president misuses Section 232 to restrict trade. Congressional legislation to rein in a President’s ability to misuse Section 232, such as bills introduced by Senators Corker and Portman. Business Roundtable recommends that the Administration permanently exempt U.S. allies from the Section 232 tariffs. This would provide an opportunity for the United States to work with its allies to reach a mutually beneficial solution to the trade challenge.