While President Trump is no longer in office, his trade policy legacy lingers in Washington. His tariffs’ continued presence has not only been a disappointment to our allies who thought that a change in administration would usher in a new, less zero-sum view of trade, but also a continuous economic burden on the American people, who are still struggling amidst a global pandemic. Indeed, as we noted here a few weeks ago, Trump’s steel tariffs are threatening the nascent U.S. manufacturing recovery.
Though Trump imposed and championed the tariffs, responsibility also falls on the U.S. laws that let him get away with it. The biggest offender in this regard is Section 232 of the Trade Expansion Act of 1962, which authorizes the president to take actions, such as imposing tariffs, against imports deemed to be a threat to “national security.” In 2017, the Trump administration imposed 25 percent tariffs on steel and 10 percent tariffs on aluminum—mostly on our closest trading partners. The results were disastrous—higher prices, job losses, and rampant cronyism.
Yet they sadly remain in place today, continuing to do the voodoo that tariffs do so well.
Given various economic and political considerations, the Biden administration understandably needs time to evaluate the previous administration’s policies before resolving to change them. However, these “national security” tariffs are an obvious and glaring blunder from the Trump years in urgent need of correction.
But what’s so bad about using Section 232? In her confirmation hearing to become the next U.S. Trade Representative, Katherine Tai, in response to a question from Sen. Ron Wyden (D-OR) on the role of tariffs under Section 232, said “tariffs are a legitimate tool in the trade toolbox.” However, as we explain in a new paper out next week, there was little that was “legitimate” about the Trump administration’s use of Section 232, which made a mockery of Congress’ delegation of its “exclusive and plenary” power under Article I, Section 8 of the Constitution to regulate commerce with foreign nations. In case after case, Trump abused his delegated trade powers to harm numerous American companies and allies, while rewarding cronies and injecting massive uncertainty into the U.S. and global economies.
That said, Congress shares some of the blame for the current situation because the law’s drafting makes it ripe for exploitation:
- First, the statute lacks an objective definition of “national security,” essentially permitting anything to be considered a threat. This allowed, for example, the Trump administration to claim – without justification – that automobile imports posed a threat to national security.
- Second, the absence of detailed procedural requirements for public consultations and exemptions encouraged the Trump administration to cut corners in applying the law and reward cronies in the process. It also allowed the Trump administration to “modify” its actions and apply additional tariffs even when it appeared their authority to do so had lapsed.
- Third, President Trump took advantage of the law’s ambiguity to shield key Section 232 findings from both Congress and the public. Are you curious about how cars from Mexico, Europe and Japan could possibly threaten our national security? Well, so are we and a majority of Congress, but we may never know because the Commerce Department report justifying this absurd conclusion has never been released. This undermines both transparency and accountability.
One recent investigation, on imported transformers and certain grain-oriented electrical steel parts, is indicative of the problems that Section 232 creates. The investigation began in May 2020, and little movement on the topic was reported throughout the year. Then, in October 2020, Inside U.S. Trade reported that “The Commerce Department has delivered to the White House its report on the national security implications of key electrical transformer input imports,” with sources saying “it has already been submitted to the White House,” but “The White House did not respond to a request for comment; Commerce declined to comment.” Now, the law states that when the Department of Commerce completes its investigation and submits its report to the president, that report (with redactions) must be submitted to the Federal Register. To date, this has not happened.
Then, on November 2, 2020 (days before the presidential election – surely a coincidence!), Ohio-based mining company Cleveland Cliffs issued a press release to “applaud” President Trump for his action on this investigation. There was no public statement made by the president, or the Secretary of Commerce that any action would be taken at this point. In fact, we still don’t know the case details. But a company that would benefit from Trump’s protectionism has applauded his actions? This is political dysfunction in a nutshell.
On November 5, 2020, the Office of the United States Trade Representative issued a press release saying that it had consulted with Mexico to establish a monitoring regime on exports of these materials. While the president is allowed to enter into negotiations with other countries to resolve national security threats under Section 232, such negotiations must still be announced publicly. No such announcement was issued. To further complicate matters, USTR Lighthizer stated in the press release that the consultations with Mexico were conducted “pursuant to their Joint Statement of May 17, 2019,” which refers to the agreement reached in the U.S-Mexico-Canada Agreement to lift Section 232 tariffs on steel and aluminum, a different investigation altogether. How Lighthizer was able to undertake negotiations under an entirely different Section 232 investigation but to discuss imports that are not even covered by that investigation should have raised an alarm. Was Section 232 negotiating authority abused? It’s impossible to tell.
Our paper covers several other examples of how the Trump administration abused Section 232. Given these clear risks, we argue that President Biden should distance himself from this failed and regressive trade policy. In short, Section 232 is not a “legitimate” tool in the U.S. trade policy toolkit, and there are other laws that can better help us address national security threats in trade.
Biden has suggested that he wants to improve our relationships with our allies—a simple thing for him to do would be to lift all remaining Section 232 steel and aluminum tariffs. USTR Tai promised to improve transparency in trade policymaking and pursue a whole of government approach—a good place to start is to push for the release of all Section 232 reports submitted to the president by the Department of Commerce. If the Biden administration wants to use Section 232, we at least deserve to understand the rationale behind such actions, and a full historical record of its use and abuse must be made public.
Finally, Congress should take immediate steps to rectify the damage done by the Trump administration’s harmful actions with respect to Section 232 by repealing the law or heavily reforming it. Congress gave the president expansive authority under Section 232. The Trump years show why it should be taken away.