Executive Summary

• The second Trump Administration has used more executive power than most previous administrations when creating trade law.
• President Biden also used historically strong executive authority when making trade law, including his Section 232 tariffs, emergency export restrictions, and CFIUS capital outflow clamps. 
• The resulting new bipartisan consensus on using executive authority to make trade policy limits Democrats’ ability to challenge Trump’s current tariff policies on procedural grounds.

Introduction

Throughout his time in office, President Biden was a persistent advocate of innovative executive branch tactics to restrict trade volumes and capital flows in and out of the United States. While Biden did not engage in the brinkmanship negotiation strategies President Trump has used over the past month, he did use the same legal techniques to support his administration’s national security goals. 

Section 232 Tariffs

One of President Trump’s primary trade policy tools in his recent disputes with Mexico, Canada, China, and the EU has been Section 232 of the Trade Expansion Act of 1962. For example, the White House’s February 11th reinstatement of steel and aluminum tariffs cited the law as justification for the unilateral executive action. Section 232 is a clause that allows any interested party to file a complaint that a specific commodity or product is of vital security importance for the United States, and the Commerce Department can investigate the claim. If the Commerce Secretary concludes that the good’s current international supply chain poses a serious national security risk, the president then has the authority to impose any trade restrictions he deems necessary. 

During his first term, President Trump was the first president since Bill Clinton to direct his Commerce Secretary to launch a Section 232 investigation. The Trump Administration began seven investigations between 2017 and 2021, which served as a pillar of Trump’s trade policy. Biden, meanwhile, launched one Section 232 investigation of his own into rare earth metals and unilaterally announced tariffs as a result. He also acted on two of Trump’s seven investigations, placing restrictions on vanadium and bolstering the Commerce Department’s efforts to enforce steel and aluminum tariffs on Mexico and Canada. The Biden Administration, following Trump’s example, stated that some of these changes were not defense-oriented actions but followed the Administration’s general foreign policy goals. 

Despite the Biden Administration’s criticisms of many of Trump’s first term trade restrictions, it largely continued the Trump Administration’s uniquely broad interpretation and use of Section 232. This continuation, along with Biden’s maintenance of the previous administration’s tariffs on China, has provided Trump with an onramp to support his early tariff actions.

Export Restrictions

When President Trump declared 25% tariffs on Mexico and Canada on February 1, he invoked the International Emergency Economic Powers Act (IEEPA) of 1977. First used by Jimmy Carter during the Iranian Hostage Crisis, the law allows the president to impose a wide range of economic restrictions in response to a national emergency. In fact, most national emergency declarations have led to the president using the IEEPA. In its first several decades, IEEPA was used largely for situations like hurricanes and foreign military crises. However, both the Trump and Biden administrations have contributed to changing this precedent. 

In the later years of his second term, President Biden built on his tariff policy continuation strategy with new export restrictions. Like his tariffs, these restrictions supported his Administration’s escalation of economic hostilities with China. Executive Order 14105, issued on August 9, 2023, was a sweeping set of export restrictions on semiconductors, microprocessors, AI- related hardware, and integrated circuit production equipment. After the order went into effect on January 2, 2025, American firms are no longer allowed to sell any of those items to Chinese or Hong Kong firms, Chinese nationals in foreign countries, or Chinese subsidiaries in foreign countries. The Department of Treasury also established an Office of Global Transactions to monitor technology sales and investments in China. Biden took all of these actions using the emergency powers granted to him by IEEPA.

Before 2017, national emergencies were limited to the outbreak of foreign wars, international drug smuggling, natural disasters, terrorism, and pandemics. However, under the first Trump administration, there was a decided shift towards emergencies pertaining to economic statecraft. Some of Trump’s emergencies included “Communist Chinese Military Companies,” the “Drug Trade,” and “Bulk Power Systems.” While presidents have always declared national emergencies with particular policy solutions in mind, there was a clear shift during Trump’s first term towards implementing national emergencies with the primary goal of implementing economic policy.

President Biden’s export restrictions maintained this trajectory. The name of his order, “U.S. Investments in Countries of Concern,” leaves little doubt of its purpose as a shortcut to presidential trade policymaking. The restrictions themselves were not necessarily novel; the United States did impose some export controls on adversarial nations during the Cold War. However, President Biden’s generous interpretation of IEEPA was a break with the traditionally restrained role of Presidents in dictating trade policy. In many ways, Biden’s order was an even more liberal interpretation of emergency powers than Trump’s first term anti-China IEEPA orders; while the content was similar to those orders, Biden’s order lacked the military language normally used to justify emergency declarations. 

Capital Flow Restrictions

Finally, Biden created a precedent for Trump’s current use of executive power in trade policy through his clamps on outbound capital flows. Several presidents have used the Committee on Foreign Investment in the United States (CFIUS), which restricts capital inflows from nations the committee’s members deem to be concerning. For example, a CFIUS investigation prompted the sale of six Dubai-owned ports to the asset manager AIG in 2006 due to post- 9/11 fears. However, President Biden greatly expanded this mandate by placing restrictions on American foreign direct investment into China in addition to the reverse.

According to a CRS report, Congress has had considerable oversight over CFIUS since 2006. This Congressional control is why Biden’s congressional allies tried to push through three separate changes and fill the “statutory, regulatory, and implementation gaps with regard to CFIUS and export controls” in 2023 (Congressional Research Service). None of these bills passed. In response, Biden issued an executive order in 2023 that prohibited or required notification for the investment in semiconductors, quantum technology, and AI capabilities to China. This order went hand-in-hand with the previously mentioned export controls, although investment controls actually have a very separate history. 

During the first six weeks of his administration, Trump’s foreign investment policies have been nearly identical to President Biden’s. In addition to doubling down on Biden’s existing export controls, the new administration recently released a new “America First” investment policy report that details the administration’s plans to increase restrictions on both inbound and outbound foreign capital flows. 

Conclusion

During his presidency, Biden used a variety of provisions to execute his escalation of the U.S.- China trade war. Some of those provisions, like Sections 301 and 201 Trade Act of 1974, were indeed created to allow U.S. businesses to protect themselves from foreign competition. Biden used these provisions much more than many previous administrations, but his use was not qualitatively different.

However, Biden’s use of emergency powers, Section 232, and CFIUS investigations did break with traditional Executive Branch restraint on trade policy. This shift mirrored the way Trump approaches trade policy, and in many cases Biden built on the policies of the first Trump Administration. Through these actions, Biden helped to solidify a bipartisan consensus on effectively making trade and tariff policy the sole responsibility of the Executive Branch.