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Journalism of Courage
The US Supreme Court on November 5 is set to hear arguments on whether President Donald Trump overstepped his powers by using a 1977 law, known as the International Emergency Economic Powers Act or IEEPA, to impose reciprocal tariffs on trade partners — a move that has helped his administration arm-twist over half a dozen countries into signing trade deals with the US.
Emboldened by his deals with large trade partners such as the European Union, Japan, South Korea and the UK, the Trump administration has ramped up pressure on India by targeting Indian economic interests, imposing selective penal tariffs, revoking the sanctions waiver for operations at Iran’s Chabahar Port, and crippling H-1B visas in the run-up to high-stakes trade negotiations ongoing this week.
While the Trump administration’s record in courts has been far from ideal, in cases ranging from Harvard University’s federal funding cut to the defamation suit against The New York Times, an adverse ruling by the US Supreme Court on the President’s tariff powers under IEEPA could have wide-ranging ramifications for global trade.
To prevent a likely blowback, the US is swiftly opening investigations under a different statutory framework that is yet to be contested in court.
Amidst legal challenges to the President’s use of IEEPA, which the US Court of International Trade and later the Court of Appeals for the Federal Circuit have already found to be unlawful, the administration has launched a range of investigations under Section 232 of the Trade Expansion Act of 1962.
Section 232 is a specific provision in US trade law that entitles the American president to impose tariffs or quotas on imports if they are found to threaten “national security”. This measure has enabled the Trump administration to impose sectoral tariffs, such as on steel and aluminium. As tariffs under Section 232 are not subject to legal challenge, even an adverse Supreme Court ruling will allow the administration to retain leverage.
After imposing 50 per cent tariffs on steel, aluminium and copper using Section 232, the US Department of Commerce has opened fresh investigations into timber and lumber, semiconductors and semiconductor manufacturing equipment, pharma and pharma ingredients, trucks, processed critical minerals, commercial aircraft and jet engines, polysilicon and its derivatives, wind turbines, and unmanned aircraft systems along with their parts and components. The product list can be increased going forward.
While tariffs under Section 232 would be far less sweeping than the reciprocal tariffs that Trump managed under IEEPA, the former provides much stronger legal cover, as the US Supreme Court has on multiple occasions refused to entertain challenges due to the “national security” element in the statute.
India has also used “national security” as a premise to restrict the entry of goods in the past, and at the WTO, what measures fall under national security has been a hotly contested issue due to its broad scope.
Deborah Elms, trade and economic policy expert at the Singapore-based Hinrich Foundation, said in a post that while most trade eyes are understandably focused on the US “reciprocal” tariffs imposed under IEEPA and now under review by the Supreme Court, the bigger problem is the continuing expansion of Section 232 tariffs.
“These are globally applied and ostensibly justified under national security. They are unlikely to be struck down or adjusted by the courts or Congress. But of most concern, they keep expanding in coverage. The Commerce Department has just opened yet another window to solicit suggestions on how to add more items to the Section 232 coverage for steel and aluminium. The last opening resulted, as I recall, in 108 pages of new tariffs at 50 per cent. This deadline is 29 September, so firms sending goods with metal not currently included in Section 232 should be prepared for higher charges coming up fast,” Elms said.
Indian steel and aluminium exporters are already facing the threat of the carbon border adjustment mechanism in addition to high tariffs in the country. The broadening of the scope of the US tariffs could restrict more and more Indian export items that have steel and aluminium elements in them.
Trade deal may not end tariff uncertainty
The increased use of Section 232 by the US could mean that any concessions offered by India to the US under the trade deal may only apply to the current 50 per cent reciprocal tariffs on India, leaving sectoral tariffs that the US is imposing — and planning to impose — unaffected.
A concession on Section 232 may be unlikely, as the US has only offered concessions to the UK by levying 25 per cent tariffs on the UK’s steel and aluminium, compared with 50 per cent on other countries, under the US-UK Economic Prosperity Deal. Under the deal, the UK agreed to import American agricultural products, a priority for the Trump administration. London has also secured lower tariffs on limited quantities of car exports to the US.
Among the new investigations launched by the US are those into pharma and pharma ingredients, which are currently exempt. Following the results of the investigation, the Trump administration could impose tariffs under the statute, hitting India’s most critical exports. Tariffs on Indian pharma could take effect even after signing a trade deal with the US.
Sectoral tariffs could also become a point of friction, as India has already challenged Section 232 tariffs on steel, aluminium and automobiles at the WTO, and has signalled its intention to retaliate. Commentary from Trump’s trade advisor and commerce secretary does not suggest that New Delhi is being considered for concessions under the sectoral tariffs.
