Don’t Weaken Effective Section 232 Tariffs

AAM urges the Trump administration to focus on improving compliance with and strengthen enforcement of duties on steel and aluminum imports.

The U.S. Supreme Court’s decision on one set of tariffs put into place by the Trump Administration dominated recent trade headlines, but that wasn’t all the significant trade news last month. It was reported the administration is considering clarifying how Section 232 tariffs on steel and aluminum products – and on derivative products made with those metals – are calculated.

These tariffs have been key to stabilizing industries important to U.S. economic and national security and should not be weakened. Clarifying these rules should be focused on improving compliance and strengthening enforcement.

That’s the message the Alliance for American Manufacturing (AAM) sent last week to United States Trade Representative Jamieson Greer and U.S. Commerce Secretary Howard Lutnick. In a letter, AAM President Scott Paul argued the Section 232 tariffs “helped improve market conditions for U.S. producers, enabling reinvestment, modernization, and the preservation of high-quality manufacturing jobs” and that expanding coverage to downstream, derivative products has been “essential to evasion prevention.”

From the letter:

Experience has shown that foreign exporters will exploit any loopholes by sourcing foreign steel and aluminum that would otherwise be subject to Section 232 and performing minimal transformation before shipping finished goods into the United States with lower or no duties applied. … Robust derivative coverage ensures the stability of domestic steel and aluminum production, closes backdoor pathways for global overcapacity, and reinforces the strength and resilience of America’s industrial base needed to support defense, critical infrastructure, and energy security.

The Section 232 tariffs were not impacted by the Supreme Court’s decision. And it’s important to remember they’re about protecting U.S. economic and national security, as materials like steel and aluminum are essential for our defense and critical infrastructure needs. The tariffs were imposed in 2018 following a determination that excessive import flows were threatening to swamp our own steel and aluminum industries. Global overcapacity in these sectors and unfair trade practices had depressed prices, forced U.S. factory closures and hamstrung domestic manufacturers and workers. But under the cover of the 232 tariffs, market conditions have seen some improvement and serious erosion of our domestic capabilities has been avoided. That’s enabled reinvestment, modernization and (importantly) job preservation. The Section 232s on steel and aluminum have worked.

But the job isn’t done yet. Overcapacity, particularly in steel, hasn’t abated. AAM’s letter to the Trump administration notes that “global steel excess capacity is projected to reach 721 million metric tons by 2027, a level the OECD has characterized as ‘unprecedented.’” And while much of this overcapacity continues to come from China’s steel sector, many other countries – including U.S. allies – are responsible for excess production. The low-priced glut of steel exports they’ve created continues to drag down global prices, and countries around the world are issuing their own steel protections in response. Mexico, Canada and the European Union have taken steps to limit imports, raise tariffs and strengthen rules so unfairly traded products are unable to skirt trade enforcement measures.

“Together, these actions underscore a growing international consensus that robust trade defenses are necessary to shield domestic steel industries from persistent global overcapacity and unfair trade practices,” wrote Paul in the letter. And if our own Section 232 tariffs need clarification, we should be clear about what that means.

More from the letter:

Clarification should not become a vehicle for narrowing coverage, reducing effective tariff rates, or creating new pathways for circumvention. The adoption of permissive valuation rules, interpretations, or other loopholes would risk squandering the gains made under the Section 232 program and recreating the vulnerabilities that prompted action in the first place.

We’ll continue to closely monitor any changes to these important tariffs. In the meantime, you can read AAM’s letter in full here.