US and Mexico Collaborate on Steel and Aluminum Tariffs

New measures target trans-shipment practices to curb Chinese metal imports and strengthen North American trade enforcement.

Published July 11, 2024 - 00:07am

4 minutes read
United States
https://www.freightwaves.com/wp-content/uploads/2024/07/10/Tariffs_Mexico_China.jpg

Image recovered from freightwaves.com

The Biden administration, in coordination with the Mexican government, has enacted significant measures to regulate the trans-shipment of steel and aluminum through Mexico into the United States. This joint initiative, announced on July 10, is aimed at rectifying longstanding issues concerning tariff evasion by third-party countries such as China.

In a bid to protect the North American steel and aluminum market, U.S. and Mexican authorities have imposed stringent conditions on metal imports originating from Mexico. The new policy dictates that only steel and aluminum products melted and poured within the USMCA nations (United States, Mexico, and Canada) will be exempted from the substantial Section 232 tariffs, which impose a 25% duty on steel and a 10% duty on aluminum.

Continued dialogue and enforcement were highlighted as critical aspects by industry representatives. The Aluminum Association CEO, Charles Johnson, emphasized that regional cooperation is vital for driving growth, investment, and job creation in the region. Similarly, Philip Bell, President of the Steel Manufacturers Association, congratulated trade negotiators and underscored the importance of continued engagement to prevent import surges that could disadvantage U.S. steel workers.

Among the driving concerns for these new measures are the documented cases of China leveraging Mexico as a transit point to evade U.S. tariffs. China's domestic overproduction and falling internal demand have led to increased exports of steel and aluminum, some of which find their way into the North American market via Mexico. Industry stakeholders, like Scott Paul of the Alliance for American Manufacturing, have voiced concerns over this practice, citing it as a sophisticated form of trade cheating designed to bypass U.S. trade laws.

American Iron and Steel Institute CEO Kevin Dempsey applauded the administration's moves to address what he referred to as a significant loophole in the Section 232 tariff provisions. He called for meticulous trade monitoring and complete transparency from Mexico regarding the origins of its steel imports and exports to ensure the efficacy of the reform.

Lael Brainard, the U.S. National Economic Advisor, highlighted that these actions rectify an oversight from the previous administration, which allowed China to circumvent U.S. tariffs by using Mexico as a backdoor into the American market. The White House's joint efforts with Mexico are aimed at fortifying the North American steel and aluminum supply chains, ensuring that no unfair trade practices compromise the domestic industries or national security.

Other political dimensions play into this development as well. President Biden and Mexican President Andres Manuel Lopez Obrador's statements emphasized that these joint measures are crucial to safeguarding the North American market from unfair trade practices. The U.S. is keen to maintain its robust economic standing and ensure that strategic sectors like steel and aluminum remain protected from foreign exploitation.

On the economic front, the United States imported about 3.8 million tons of steel from Mexico in 2023, with 13% originating from outside North America and thus newly subject to tariffs. An additional import of 105,000 metric tons of aluminum from Mexico, of which 6% was smelted or cast abroad, will also face tariffs. These figures underline the volume of trans-shipped products now subject to the revised tariff structure.

These measures are not just a reflection of trade policies but also have political undertones. Senator Sherrod Brown from Ohio has been a prominent advocate for halting Mexican steel imports, citing them as a threat to U.S. steelworkers. This stance aligns with the broader bipartisan efforts to curb imports that could undermine domestic labor and production capabilities.

Ultimately, the effectiveness of these new tariffs will depend on rigorous enforcement and cooperation between the U.S. and Mexican governments. The aim is to close loopholes and prevent import surges that could destabilize the North American steel and aluminum markets while establishing a steady framework for fair trade practices moving forward.

Sources

How would you rate this article?

What to read next...