Section 232 Investigations Prompt Trade Negotiation

The US president on January 14, 2026 issued two proclamations addressing imports of semiconductors and processed critical minerals and their derivatives following investigations pursuant to Section 232 of the Trade Expansion Act of 1962. One proclamation imposes a 25% ad valorem tariff on a certain narrow subset of semiconductor articles based on specified technical parameters, and the second proclamation instructs the secretary of Commerce and the US trade representative (USTR) to negotiate agreements on imported critical minerals. The language of both proclamations requires the US Department of Commerce to engage in ongoing monitoring and leaves open the possibility for enhanced trade measures—including the imposition of additional tariffs—to advance the administration’s broader trade agenda.

Commerce initiated an investigation into the US national security implications of importing semiconductors, semiconductor manufacturing equipment, and their derivative products (collectively, semiconductors) on April 1, 2025, and into processed critical minerals and their derivative products (collectively, critical minerals) on April 22, 2025. Commerce later delivered to the president reports concluding that the current quantities and circumstances of imported critical minerals and semiconductors threaten US national security.

PROCLAMATION ON CRITICAL MINERALS RESULTS IN NO IMMEDIATE TARIFFS

Commerce initiated an investigation into processed critical minerals on April 22, 2025. Commerce later delivered to the president a report concluding that the current quantities and circumstances of imported critical minerals threaten US national security. The president then issued a Critical Minerals Proclamation expressing that processed critical minerals and their derivative products threaten US national security. Derivative products include “all goods that incorporate processed critical minerals as inputs.” These goods include semi-finished goods (like anodes and cathodes) as well as final products like motors, batteries, radar systems, wind turbines, and advanced optical devices.

The administration did not impose immediate tariffs and instead initiated negotiations to address dependency on foreign supply chains. The proclamation allows the administration to take future action in deploying tools like tariffs, minimum import prices, or quotas if trade negotiations do not sufficiently reduce reliance on foreign sources.

As outlined in the Critical Minerals Proclamation, the report on critical minerals found that in 2024 the US was wholly dependent on imports of 12 critical minerals and highly reliant on imports of 29 additional critical minerals, especially due to the US’s limited processing capacity. The proclamation emphasizes that critical minerals are essential to the US defense industrial base and military technology and the 16 critical infrastructure sectors identified in National Security Memorandum 22. Further, the Critical Minerals Proclamation highlights the proclivity of critical mineral markets to price volatility, which subsequently deters investment, maintenance, and long-term viability of domestic mining, processing, and downstream manufacturing capacity of critical minerals.

The Critical Minerals Proclamation shares Commerce’s recommended course of action, which includes negotiating the imports of critical minerals to address potential shortages of critical mineral supplies and imposing import restrictions when negotiation fails. The president directed Commerce and USTR to negotiate agreements discussing possible price floors and trade-restricting measures on critical minerals with global partners and to provide a report within 180 days, or by July 13, 2026. Commerce must also monitor imports of processed critical minerals on an ongoing basis and reassess the impact of imports on US national security, recommending additional Section 232 actions if necessary. The Critical Minerals Proclamation does not provide details on negotiating strategy, specific minerals or products of focus, or identify trading partners of concern.

The US administration has long pushed for diversity of critical mineral supplies following China’s expansion of rare earth element and other critical mineral exports in 2025, and the Critical Minerals Proclamation appears to be an extension of that effort. Bilateral framework agreements addressing critical minerals have been signed between the United States and several trading partners, including Argentina, Australia, Cambodia, Japan, Malaysia, and Thailand. On February 4, the United States announced efforts to establish a preferential trade zone for critical minerals among 50 countries that would create a price floor, identify specific critical minerals of interest, and provide regulatory standards for mining and processing critical minerals.

SEMICONDUCTORS: NARROW TARIFFS IMPOSED

As provided for in the January 14 Semiconductor Proclamation, Commerce’s report on imported semiconductors found that while the US consumes one quarter of the world’s semiconductors, 90% of current domestic demand for semiconductors is met through imported product. The Semiconductor Proclamation further notes that heavy foreign dependence on semiconductors threatens US national security because semiconductors are essential to the 16 critical infrastructure sectors identified in National Security Memorandum 22, and semiconductors that enable artificial intelligence are critical to many data centers in the United States.

The Semiconductor Proclamation elaborates on Commerce’s proposed two-phase plan. As proposed, the first phase would include negotiations with foreign countries regarding imported semiconductors and the imposition of ad valorem tariffs on certain categories of semiconductors. The second phase would broaden the categories of semiconductors subject to tariffs while implementing a tariff offset program. On January 14, 2026, the president implemented the first phase by imposing a 25% tariff on certain imported semiconductors and directing Commerce and USTR to negotiate agreements regarding imported semiconductors with global trading partners.

Under the Semiconductor Proclamation, only semiconductors that meet the required technical parameters outlined in the definition of “semiconductor articles” and are classifiable under the Harmonized Tariff Schedule of the United States within provisions 8471.50, 8471.80, and 8473.30 are subject to a 25% tariff.

As defined, semiconductor articles are a logic integrated circuit, or an article that contains a logic integrated circuit, that meets the technical parameters of having

1. a total processing performance greater than 14,000 and less than 17,500, and a total DRAM bandwidth greater than 4,500 GB/s and less than 5,000 GB/s; or
2. a total processing performance greater than 20,800 and less than 21,100, and total DRAM bandwidth greater than 5,800 GB/s and less than 6,200 GB/s.[1]

These technical parameters roughly correspond to chips at the level of NVIDIA’s H200 GPU and AMD’s MI325X accelerator. This tariff announcement aligns with the administration’s prior policy announcement authorizing the export of H200s to the People’s Republic of China and Macao, subject to 25% of the revenue. Read more about that policy in our prior publication, BIS Revises Export Review Policy for Advanced AI Chips Destined for China and Macau.

The administration framed the tariffs as targeting semiconductors that are later exported while protecting domestic usage. Semiconductors meeting the above technical parameters are exempt if they are imported for the following purposes:

• Use in US data centers[2]
• Repairs or replacements performed in the United States
• Research and development in the United States involving these chips[3]
• Use by startups in the United States[4]
• Use in non-data center consumer electronics applications in the United States, including gaming, personal computing, professional visualization, workstation applications, and automotive applications
• Use in non-data center civil industrial applications in the United States, including factory robotics and industrial machinery
• Use in United States public sector applications

Imported semiconductors are not subject to the additional duties imposed under existing Section 232 programs or the various tariffs imposed under the International Emergency Economic Powers Act (IEEPA). Like other tariffs imposed pursuant to Section 232, covered semiconductor articles are not eligible for drawback or protections under existing free trade agreements. Any further exemptions or offsets will come from newly negotiated bilateral agreements. The current impact of the Semiconductor Proclamation is limited based on the above technical parameters, but the president “may consider imposing significant tariffs” on a broader range of products depending on the status of ongoing bilateral trade negotiations.

LOOKING AHEAD

The Critical Minerals Proclamation and Semiconductor Proclamation signal that Section 232 investigations may be fodder for bilateral trade negotiation and advancing the administration’s broader trade agenda rather than functioning as strict tariff revenue. Indeed, tariffs outlined in the Semiconductor Proclamation may be used to negotiate a new, direct investment of semiconductor production and innovation capacity in the United States. Effective January 15, 2026, Taiwanese companies building new semiconductor capacity or completing new chip production projects in the US can export specified quantities of semiconductors without paying Section 232 duties.[5] As of January 19, 2026, South Korea is seeking similar favorable terms regarding its exports of semiconductors.[6]

The Critical Minerals Proclamation and the possibility of future tariffs on processed critical minerals and derivative products may encourage US trading partners to engage in the proposed plurilateral agreement concerning a critical minerals trade zone. We have already seen bilateral negotiations concerning imported critical minerals and expect that future bilateral negotiations will also address imported critical minerals and possible future tariffs affecting those goods.

While there are no immediate cost increases for importing affected products, the Critical Minerals Proclamation leaves many open questions for import-dependent companies. Businesses operating in the energy storage, aerospace, automotive, electronics, and advanced materials industries should follow the assessments, reports, and expanded trade actions closely. Importers may also want to conduct internal reviews to assess dependence on imported materials, review contractual allocation of risk (both from a tariff perspective and for other import restrictions), and assess diversification of supply and possible domestic options for necessary materials.

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