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August 15, 2025 | 13:27
The 411 on 232s
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The 411 on 232sThe Administration has ramped up its use of Section 232 ‘national security’ tariffs with many new investigations underway. Amid the legal uncertainty surrounding IEEPA tariffs, ‘232s’ appear destined to endure and expand. |
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After hearing oral arguments on July 31, the U.S. Court of Appeals is deliberating its ruling on whether tariffs imposed under the International Emergency Economic Powers Act (IEEPA) are legal. The decision will likely be appealed to the Supreme Court. One of the arguments against IEEPA tariffs is that Congress has constitutional authority over taxes and duties, and it delegates some of this authority to the President only under specific legislation (Table 1). And IEEPA is not one of them. Indeed, the original ruling by the U.S. Court of International Trade (which was appealed) indicated that Section 122 of the Trade Act of 1974, and not IEEPA, was the suitable remedy for large persistent trade deficits. Section 122 gives authority to impose tariffs of up to 15% for up to 150 days (and Congress could extend them). In the August 1 re-introduction of country-specific, IEEPA-justified reciprocal tariffs, note that 43 of the 69 affected jurisdictions faced a duty of 15% or less, with the ‘baseline’ global tariff still at 10%. These are all potentially justifiable under Section 122. Meanwhile, the other tariff workhorse for the Administration has been the ‘232s’. |
Section 232 of the Trade Expansion Act of 1962 gives authority to impose tariffs once it’s determined that imports of certain goods are occurring “in such quantities” or “under such circumstances” that they “threaten to impair the national security”. This determination is made via an investigation by the Bureau of Industry and Security (BIS), which is part of the U.S. Department of Commerce. Once an investigation has been started, the BIS has up to 270 days to prepare a report with recommendations for the President. Given the national security concerns, the reports are not immediately made public, but they are eventually published (often redacted). Once a report is delivered, and there’s a positive determination (that imports threaten national security), the President has 90 days to decide whether to concur and whether to take action. And then 15 days to implement the action, within a 30-day window to inform Congress. |
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Note that national security extends beyond national defence. The BIS’ Section 232 Investigation Program Guide states that “the term ‘national security’ can be interpreted more broadly to include the general security and welfare of certain industries, beyond those necessary to satisfy national defense requirements, which are critical to the minimum operations of the economy and government.” The criteria are:
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Before 2017, there had been 26 individual investigations initiated since the legislation was enacted (Chart 1). Since the first report in 1963, nine had positive determinations, 16 had negative determinations, and one investigation was terminated. Among the positive determinations, petroleum imports generally, or from specific countries (Iran, Libya), were the subject of eight separate investigations over the 54-year interval. These resulted in either license and other fees being imposed (3), embargos (2), or no action being taken (3). Imports of machine tools were the subject of the other investigation which resulted in voluntary export restraints. Note that before 2017, only non-tariff barriers were employed as remedies when action was taken. And investigations on the same subject were repeated over time, even those with negative determinations, such as the case for manganese and chromium. This was the inaugural investigation in 1963 and it subsequently went 0-for-3. |
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Beginning in 2017 in the first Trump Administration, Section 232 investigations started to emphasize the broader definition of national security (and all the above criteria). For the interval ending in 2020, eight investigations were started: seven resulted in a positive determination and one was terminated (Table 2). Tariffs were imposed for the first time as an outcome of a 232 investigation, on steel and aluminum. (These were eventually removed for many countries/regions during both the Trump and Biden Administrations.) For the rest, the actions were administrative (no tariff or non-tariff barriers) e.g., working groups to monitor the situation. No actions on transformers and components along with vanadium occurred before President Trump’s first term ended. President Biden’s actions in the case of the two ‘leftover’ investigations were also administrative. From 2021 to 2024, only one new Section 232 investigation was initiated. This resulted in a positive determination in the case of neodymium-iron-boron permanent magnets. Again, the action was administrative. On his second Inauguration Day, this year, President Trump signed the America First Trade Policy Memorandum. It ordered that “the Secretary of Commerce, in consultation with the Secretary of Defense and the heads of any other relevant agencies, shall conduct a full economic and security review of the United States’ industrial and manufacturing base to assess whether it is necessary to initiate investigations to adjust imports that threaten the national security of the United States”. |
On February 10, the President announced that tariffs on steel and aluminum would be re-imposed effective March 12. On March 26, he announced new tariffs on automobiles effective April 3 (parts followed within a month). In both cases, the original investigations from the first Trump Administration were dusted off. Based on 2017 data, the following tariff levels were recommended (among other measures): steel 24%, aluminum 7.7%, and autos and parts 25%. At the time, steel and aluminum were rounded up to 25% and 10%, respectively. The Administration opted not to tariff autos and parts ahead of the USMCA’s new higher (and rising) regional value content requirement. In the USMCA, future Section 232 tariffs on autos and parts would exclude Canada and Mexico under certain conditions, and both countries would get time to negotiate tariff-rate quotas for future 232s. The current Administration has not honoured these parts of the USMCA. One wonders whether the conclusions drawn from 2017 data would be confirmed by fresher figures. Pre-2017, multiple investigations occurred on the same subject. This time, aluminum was set at 25%, the same as steel, and both were later boosted to 50%. Autos and parts were set at the original 25%, excluding USMCA-compliant parts and the U.S. content in USMCA-compliant vehicles. |
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And the BIS has been busy as nine new Section 232 investigations have been initiated (Table 2 again). The first of them, on copper, resulted in a report to the President on June 30. The investigation looked at copper imports in all forms (ores, concentrates, refined copper, alloys, scrap copper, and derivatives). According to the July 30 proclamation, the report concluded that “copper is being imported into the United States in such quantities and under such circumstances to threaten to impair the national security”. It recommended a universal 30% tariff on semi-finished copper products and copper-intensive derivative products, among other measures (tariff recommendations for other copper forms are unknown). The President opted for 50%. We await announcements on the other ongoing investigations. The President has talked about a 100% tariff on semiconductors and a potential ‘eventual’ duty on pharmaceuticals as high as 250%. Meanwhile, the trade deals with Japan and the EU rolled back the 25% Section 232 tariffs on automobiles and parts to the deal’s universal 15% levy. The 50% tariffs on steel and aluminum remained. The U.K.’s deal reduced duties on autos to 10% (up to a quota) and kept the metals’ tariff at 25% instead of 50%, with the prospect of being reduced to the 0%-to-10% range. The fact that Section 232 tariffs are being set both well above and below their prescribed rates show that they are being employed as trade negotiation levers as much as national security levies. Regardless of the legal fate of IEEPA-justified duties, the tariff parade appears poised to persist, partly paced by 232s. |