Congress has awakened to potential abuses of presidential trade authority.
President Donald Trump invoked "Section 232" to justify tariffs on about $46 billion in steel and aluminum imports, irking military allies and prompting retaliatory taxes from the likes of Canada, Mexico, China and the European Union.
Many in the Senate, led by members of the president’s own party, call the levy imposition groundless. Here’s why.
What Is Section 232?
Section 232 of the Trade Expansion Act of 1962 authorizes the president to adjust specific imports from other countries if the importation “is in such quantities or under such circumstances as to threaten to impair the national security,” according to the Bureau of Industry and Security.
Under the policy, the secretary of commerce can conduct an investigation into whether a particular import threatens to impair national security. Inquiries can be initiated by interested parties, requested by a department or agency head or self-initiated by the secretary.
The secretary of defense must be informed of any investigation and can be consulted for policy information and advice.
Criteria considered in the investigation include:
- The "requirements of the defense and essential civilian sectors;
- growth requirements of domestic industries to meet national defense requirements;
- quantity, quality, and the availability of imports;
- impact of foreign competition on the economic welfare of the essential domestic industry;
- [and] the displacement of any domestic products causing substantial unemployment, decrease in the revenues of government, loss of investment or specialized skills and productive capacity.”
The commerce secretary is to prepare a report within 270 days of initiation and recommend action to the president, who can then impose tariffs or quotas to “adjust the imports of an article and its derivatives” or pursue other non-trade related action.
The president has 90 days to formally respond, and if he concurs with the secretary’s findings, he can “determine the nature and duration of the action that, in the judgment of the president, must be taken to adjust the imports of the article and its derivatives so that such imports will not threaten to impair national security.”
He must then submit to Congress a written statement of reasons why he took action.
How Is Trump Using It?
That’s how Section 232 is supposed to work, but some suggest it’s being abused under Trump.
For one, the White House has not given the legislative branch the authority it claims both under Section 232 and the Constitution. The latter provides Congress the power to regulate trade and “to lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common [defense] and general welfare of the United States.”
If Trump believes Section 232 must be invoked to protect the U.S. from a genuine threat, "he should make the case to Congress and to the American people and do the hard work necessary to secure congressional approval," Sen. Bob Corker, a Tennesee Republican, said in a statement.
Additionally, some say the national security defense for tariffs has been distorted, with the true intent of the tax being the manipulation of favorable trade agreements and brokering of favorable prices.
"There is no real national security threat that these tariffs are a response to. They are an effort to impose a protectionist policy for economic purposes," Pennsylvania Republican Sen. Pat Toomey said in a floor speech.
Some argue the duties have done more harm than good. The sweeping charges have irked trading partners and raised prices for American consumers and import-reliant businesses.
What Could Happen Next?
On Wednesday, the Senate passed a symbolic, nonbinding measure asserting congressional authority over the president’s trade decisions. The vote instructs lawmakers developing a government funding bill to include language guaranteeing Congress a say in the enaction of Section 232 tariffs.
A bill is also on the table to require the president to submit any proposed trade restrictions under Section 232 for congressional approval.
The Department of Commerce will host a public hearing on the Section 232 investigation of autos and auto parts on July 19.
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© 2020 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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