Greater Security and Prosperity? Thoughts on Section 232 Aluminum Trade Barriers

AOM Advisors
May 17, 2024
2 min read

Academic paper

May 17, 2024

By Antonio Ortiz-Mena

Source: SSRN

PDF Format | 341KB

Abstract

In March 2018, the Trump administration imposed tariffs and quotas on steel and aluminum imported into the United States, based on national security considerations under Section 232 of the Trade Expansion Act of 1962. The measures on steel and aluminum were initially applied against allies and adversaries alike, sidestepping some of the priorities set out by the Biden administration’s 2022 National Security Strategy, which called for out-competing foreign nations while deepening the alliance with Europe, promoting an open Indo-Pacific, and fostering shared prosperity in the Western Hemisphere.

Over a six-year span of exemptions and exclusions granted, the 232 actions created uncertainty, economic turmoil, and, with the evidence available so far, seem not to have boosted security and prosperity in a significant manner. In fact, for a multitude of reasons, the Section 232 tariffs on steel and aluminum have proven both ineffective and counterproductive.

Primary aluminum production has not increased domestically: in 2023 output was just slightly higher than before the enactment of Section 232 tariffs, and the restrictive measures have come at a high price, with the Tax Foundation estimating 75,000 manufacturing job losses due to the steel and aluminum tariffs. Supply chain disruptions affect downstream industries that use aluminum as an input, increasing production costs, and retaliation remains a permanent threat. The curtailment of aluminum inputs and rise in domestic prices have negative spillover effects for industries ranging from electric vehicles (EVs) to beverages.

Economic costs have not been compensated for by a boost in security: production has remained stagnant while protectionist measures have alienated allies and risked retaliation. Some US Government (USG) estimates put military needs for aluminum at about 3% of US consumption. Assuming an annual consumption of four million metric tons, this means that approximately 120,000 metric tons are required for military needs. Recent estimates show an estimated US production of 750,000 metric tons of primary aluminum, which should be sufficient to cover military needs.

Keywords

Section 232, trade, aluminum, tariffs, international economics, USMCA

JEL Classification

F13

Suggested Citation

Ortiz-Mena, Antonio, Greater Security and Prosperity? Thoughts on Section 232 Aluminum Trade Barriers (May 17, 2024).

Available at SSRN: https://ssrn.com/abstract=4832090 or http://dx.doi.org/10.2139/ssrn.4832090

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