The Continued Retreat: Commerce Secretary Announces Section 232 Investigations into Pharmaceuticals and Semiconductors

Background

Section 232 investigations determine whether the targeted U.S. imports threaten to impair U.S. national security. At the conclusion of a Section 232 investigation (which can last for up to 270 days), the President must decide, based on the findings of the investigation, whether to use executive authority to “adjust imports” of the targeted items (for example, through the implementation of additional ad valorem rates of duty, or tariffs). The Bureau of Industry and Security (“BIS”) at the U.S. Department of Commerce, is responsible for conducting the Section 232 investigations, and it will consider various critical factors including:

• The requirements of the defense and essential civilian sectors;
• Growth requirements of domestic industries to meet national defense requirements;
• The quantity, quality, and availability of imports;
• The 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.

Since January, the Trump Administration has used Section 232 to increase the rates of duty on U.S. imports of steel and aluminum to 25%; impose a 25% rate of duty on imported automobiles (including passenger vehicles, cargo vans, and trucks) and certain automobile parts; initiate a Section 232 investigation into U.S. imports of timber, lumber, and their derivative products; and initiate a Section 232 investigation into U.S. imports of copper. In addition, a recent Executive Order called for the initiation of a Section 232 investigation into U.S. imports of critical minerals and their derivate products. These actions are in addition to the investigations that the Trump Administration has pursued, or moved forward from the Biden Administration, pursuant to the President’s authority under Section 301 of the Trade Act of 1974, as amended (“Section 301”). Different from Section 232, Section 301 investigations are conducted by the United States Trade Representative and are meant to examine unfair trade practices of certain countries. Ongoing Section 301 actions include an investigation regarding China’s policies and practices related to targeting the semiconductor industry, and a separate investigation regarding China’s policies and practices in the maritime, logistics, and shipbuilding industry.

Notably, Section 232 tariffs will not “stack” on top of the “reciprocal” tariffs that the Trump Administration announced pursuant to Executive Order 14257 of April 2, 2025 (“Regulating Imports With a Reciprocal Tariff to Rectify Trade Practices that Contribute to Large and Persistent Annual United States Goods Trade Deficits”). That Executive Order excluded semiconductor and pharmaceutical products from its scope, leaving the Section 232 tariff process to cover those products. However, if the above Section 301 investigation results in additional duties targeting semiconductor products, the Section 232 tariffs could aggregate with the Section 301 duties. This would also aggregate with existing Section 301 tariffs broadly targeting China that have been in place since the first Trump Administration.

Overview of Announced Section 232 Investigations

What Happened

On Monday, April 14, 2025, the Secretary of Commerce announced the initiation of two separate investigations to determine the effects on U.S. national security of imports of (i) pharmaceuticals and pharmaceutical ingredients and (ii) semiconductors, semiconductor manufacturing equipment (“SME”), and their derivative products.

The notice for each investigation indicates the areas of specific interest that BIS will examine as part of its assessments, which include the following:

Pharmaceuticals and Pharmaceutical Products

• The current and projected demand for pharmaceuticals and pharmaceutical ingredients in the United States;
• The extent to which domestic production of pharmaceuticals and pharmaceutical ingredients can meet domestic demand;
• The role of foreign supply chains, particularly of major exporters, in meeting United States demand for pharmaceuticals and pharmaceutical ingredients;
• The concentration of United States imports of pharmaceuticals and pharmaceutical ingredients from a small number of suppliers and the associated risks;
• The impact of foreign government subsidies and predatory trade practices on United States pharmaceuticals industry competitiveness;
• The economic impact of artificially suppressed prices of pharmaceuticals and pharmaceutical ingredients due to foreign unfair trade practices and state-sponsored overproduction;
• The potential for export restrictions by foreign nations, including the ability of foreign nations to weaponize their control over pharmaceuticals supplies;
• The feasibility of increasing domestic capacity for pharmaceuticals and pharmaceutical ingredients to reduce import reliance;
• The impact of current trade policies on domestic production of pharmaceuticals and pharmaceutical ingredients, and whether additional measures, including tariffs or quotas, are necessary to protect national security; and
• Any other relevant factors.

Semiconductors, SME, and their Derivative Products

• The current and projected demand for semiconductors (including as embedded in downstream products) and SME in the United States, differentiated by product type and node size;
• The extent to which domestic production of semiconductors can or is expected to be able to meet domestic demand at each node size for each product type, and similarly the extent to which domestic production of SME can or is expected to be able to meet domestic demand;
• The role of foreign fabrication and assembly, test and packaging facilities in meeting United States semiconductors demand, and similarly the role of foreign supply of SME in meeting domestic demand;
• The concentration of United States semiconductors imports (including as embedded in downstream products) from a small number of fabrication facilities and the associated risks, and similarly the concentration of United States SME imports from a small number of foreign sources;
• The impact of foreign government subsidies and predatory trade practices on United States semiconductor and SME industry competitiveness;
• The economic or financial impact of artificially suppressed semiconductor and SME prices due to foreign unfair trade practices and state-sponsored overcapacity;
• The potential for export restrictions by foreign nations, including the ability of foreign nations to weaponize their control over semiconductors and SME supply chains;
• The feasibility of increasing domestic semiconductors capacity (in different product types and node sizes) to reduce import reliance, and similarly the feasibility of increasing domestic SME capacity to reduce import reliance;
• The impact of current trade and other policies on domestic semiconductor and SME production and capacity, and whether additional measures, including tariffs or quotas, are necessary to protect national security;
• What product types and node sizes could be built only using SME from U.S. companies;
• What SME is manufactured abroad and faces limited competition from U.S.-made products;
• What SME parts or components are only available outside the United States;
• Where the U.S. workforce faces a talent gap in production of semiconductors, SME or SME components; and
• Any other relevant factors.

What Happens Next

Interested parties have until May 7, 2025, to submit a public comment to provide BIS with additional information regarding the above areas of specific interest, or to provide any arguments in the contrary.

Once the public comment period concludes, it is not clear based on the notices whether BIS will hold public hearings to provide interested parties an additional opportunity to share their views with respect to the investigations. Although Section 232 allows for public hearings, BIS does not always pursue this step. President Trump has also indicated his desire for the investigations to conclude as soon as possible (i.e., within a matter of a month or two), which may contribute to BIS’ decision to forgo public hearings as part of the investigation process. As stated above, pursuant to Section 232, the investigations may run for up to 270 days, which means the investigations would conclude in January 2026 if the full-time allotment is utilized.

What To Do Now

U.S. companies can consider the following measures to help prepare for the likely trade actions (i.e., increased tariffs) that will result from the Section 232 investigations with respect to pharmaceuticals, pharmaceutical ingredients, semiconductors, SME, and their derivative products:

• Review contract terms to understand and potentially renegotiate tariff payment obligations (i.e., which party is responsible for the payment of any additional ad valorem rates of duty upon the import of affected goods);
• Review global supply chains to consider the feasibility of shifting manufacturing and/or supply chains;
• Participate in the Section 232 (or Section 301) investigations to advocate for specific exclusions from the impending tariff actions; and/or
• Join industry associations that can develop industry-wide strategies, initiate legal challenges to the Trump Administration’s actions, and engage in lobbying campaigns.

Companies should also continue to monitor this developing situation, as the evolution of U.S. trade policy continues.