Trade Investigations of Semiconductor and Pharmaceutical Sectors Present Opportunities, but Potentially More Tariffs

Events continue to unfold in the shifting U.S. tariff landscape. Following last week’s developments relating to the President’s reciprocal tariffs (see our prior alert - Managing Risks on the Tariff Roller Coaster Ride), the U.S. Department of Commerce has initiated two Section 232 investigations – the first on semiconductors and semiconductor manufacturing equipment and the second on pharmaceuticals and pharmaceutical ingredients – to assess the effect that imports of those products have on U.S. national security. The Trump Administration had exempted a range of these products from last week’s reciprocal tariffs in apparent anticipation of these investigations. The Commerce investigations could result in the imposition of restrictions to address imports that threaten to impair national security including additional tariffs or other trade measures such as quotas. The 232 investigations are the first time that the public has had a formal opportunity to weigh in on the merits of tariff measures since the start of the second Trump Administration. 

The Notice announcing the semiconductors and semiconductor manufacturing equipment investigation seeks comment on a range of topics concerning the conditions of competition in that sector, including:

• Demand for semiconductors, including as embedded in downstream products that contain semiconductors in the electronics supply chain
• Whether U.S. producers can meet demand for the full range of semiconductor products, and if there are obstacles to same, such as a talent gap
• The role of foreign semiconductor fabs meeting U.S. demand
• The potential for foreign nations to restrict exports
• The impact of unfair trade practices and state-sponsored overcapacity on pricing

The Notice announcing the pharmaceutical investigation seeks comments on a range of similar topics related to imports of pharmaceuticals and pharmaceutical ingredients including finished drug products, medical countermeasures, active ingredients and key starting materials, including:

• Whether U.S. producers can meet demand for pharmaceutical products, and if there are obstacles to same, such as a talent gap
• The role of foreign supply chains in meeting U.S. demand
• The ability of U.S. producers to increase production to reduce reliance on imports
• The potential for foreign nations to restrict exports
• The impact of unfair trade practices, such as state subsidies, on pricing

Comments in both Section 232 investigations are due by May 7th, 21 days after the April 16th Federal Register publication date of the Notices. Comments on the Notices may be submitted to the Federal rulemaking portal at: www.regulations.gov.

This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Greta L. Nightingale, an O’Melveny partner licensed to practice law in the District of Columbia; David J. Ribner, an O’Melveny partner licensed to practice law in the District of Columbia and New York; Pamela A. Miller, an O'Melveny partner licensed to practice law in New York; Steven J. Olson, an O'Melveny partner licensed to practice law in California; Jennifer B. Sokoler, an O'Melveny partner licensed to practice law in New York; Meaghan VerGow, an O'Melveny partner licensed to practice law in the District of Columbia and New York; and Amanda M. Santella, an O'Melveny partner licensed to practice law in the District of Columbia and Maryland, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.

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