Trump Administration Expands Tariffs Under National Security Laws Amidst Supreme Court Challenge

Strategic Insights -

The Trump administration is constructing a new system of tariffs using national security laws, outside the jurisdiction of the current lawsuits challenging President Trump's tariffs. This move aims to circumvent potential judicial reversals of the president's tariffs on countries like Switzerland and India. The administration has proposed or issued tariffs covering over a third of U.S. imports under Section 232, a national security provision. This includes critical products like cars, machinery, medical devices, and semiconductors.

Key Takeaways:

  • The administration has proposed or issued tariffs covering over a third of U.S. imports under Section 232, including critical products like cars, machinery, medical devices, and semiconductors.
  • The tariffs would impact various industries, including semiconductors and electronics, which could raise costs further for consumers and businesses.
  • The administration has expanded the use of Section 232, with Mr. Trump announcing tariffs ranging from 25% to 100% on imports of pharmaceuticals, semi-trucks, kitchen cabinets, and furniture, starting October 1.
  • Investigations into industrial machinery, robotics, medical devices, and personal protective gear could lead to tariffs, affecting consumers, farmers, car owners, manufacturers, clinics, and hospitals.
  • Ed Gresser, the director for trade at the Progressive Policy Institute, stated that the inclusion of medical devices and industrial machinery would significantly expand the scope of the Section 232 tariffs.
  • The administration's use of Section 232 tariffs gives the president a powerful alternative to apply tariffs if the Supreme Court rules against the president's use of the International Emergency Economic Powers Act.
  • Courts traditionally defer to the president on national security, and the Section 232 provision is considered relatively secure from legal challenges.
  • Jay Timmons, the president of the National Association of Manufacturers, stated that tariffs on manufacturing inputs, including robots and industrial machinery, would significantly increase costs for manufacturers and could stall investment in new plants and equipment.
  • Mr. Trump's new tariffs on foreign semi-trucks seem more limited due to the majority of heavy trucks being manufactured in the United States.
  • The administration has secured exemptions for European Union pharmaceutical products, as part of a trade pact, which will apply a 15% tariff instead of the 100% rate.
  • Mr. Trump has offered exemptions to pharmaceutical companies building factories in the United States, but these exemptions would only cover drugs manufactured in the United States, not all products at the company.

Statistics:

  • Over a third of U.S. imports are covered by the administration's proposed or issued tariffs under Section 232.
  • The 100% tariff on foreign-branded pharmaceuticals could have a limited reach, as most imports of those products come from the European Union.
  • The European Union has secured a 15% tariff on pharmaceuticals as part of a trade pact with the United States.
  • Most big drugmakers have responded to Mr. Trump's tariff threats with plans to build or expand factories in the United States.
  • The next tranche of tariffs hanging over corporate America are tariffs Mr. Trump has threatened on semiconductors and devices that contain them.

Sources:

  • The New York Times (published: September 25, 2022)
  • Oral arguments at the Supreme Court (set for November)
  • A report from the administration (expected to clarify why tariffs on furniture are a national security matter)
  • Tripp Mickle, reporting from San Francisco (for The New York Times)
  • The Wall Street Journal (reported details of the meeting between Howard Lutnick, the commerce secretary, and semiconductor executives in Washington)