The US and Mexico on Wednesday announced new steps to fight the circumvention of US tariffs on steel and aluminium by China and other countries that ship products through Mexico, implementing a North American “melted and poured” standard for steel.
The election-season moves by President Joe Biden’s administration mark the latest in a series of efforts to guard against excess industrial capacity in China – which Washington has repeatedly warned could bring a flood of unfairly priced goods to other markets.
The White House said that under a new policy implemented by President Joe Biden, steel product imports from Mexico will be subject to 25 per cent US “Section 232” tariffs unless the steel is documented to have been melted and poured in Mexico, the US or Canada.
Similarly, for aluminium product imports from Mexico to escape the 10 per cent Section 232 tariffs, they must not contain primary aluminium that is smelt or cast in China, Russia, Belarus or Iran.
“These actions fix a major loophole that the previous administration failed to address, and that countries like China use to avoid US tariffs by shipping their products through Mexico,” White House National Economic Adviser Lael Brainard told reporters.
09:30
China’s ‘gold rush’ in Mexico: why are Chinese companies investing south of the Rio Grande?
China’s ‘gold rush’ in Mexico: why are Chinese companies investing south of the Rio Grande?
She charged that “Chinese steel and aluminium entering the US market through Mexico evades tariffs, undermines our investments and harms American workers in states like Pennsylvania and Ohio.”
Mexico has agreed to require importers of steel products across its borders to provide more information on the country of origin of these products, Biden and Mexican President Andres Manuel Lopez Obrador said in a joint statement.
“Both countries will implement policies to jointly prevent tariff evasion on steel and aluminium, and strengthen North American steel and aluminium supply chains,” the presidents said in the statement released by the White House.
Biden has courted the votes of union members and particularly the United Steelworkers in his bid for re-election in November, opposing a takeover by Japan’s Nippon Steel of Pittsburgh-based US Steel.
Back door
The new import requirements come amid increasing concerns about China’s excess industrial capacity flooding global markets with exports amid weak domestic demand. It comes after Biden in May hiked tariffs on a broad array of strategic goods from China, including steel and aluminium, electric vehicles, batteries, semiconductors and critical minerals.
But US officials have grown increasingly concerned that Mexico could become a back door for China into the US market, taking advantage of Mexico’s duty-free access through the North American trade pact.
Reuters reported in April that the US officials cautioned their Mexican counterparts against offering incentives to Chinese electric vehicle manufacturers that were scouting out potential factory sites in Mexico.
“These joint actions with Mexico will help to ensure the long-term viability of our steel and aluminium industries,” said US Trade Representative Katherine Tai.
Metal found to have Chinese origin would also be subject to 25 per cent Section 301 duties, a rate increased by Biden in May.
Volumes of steel imports from Mexico originating elsewhere were small in 2023, making up only about 13 per cent of the 3.8 million tons of steel imported from Mexico, according to US Census Bureau data.
But a Biden administration official said the new requirements were “forward-looking”, meant to head off an expected surge of imports as China’s steel-consuming sectors such as real estate struggle.
The American Iron and Steel Institute, an industry group, applauded the step to close off an avenue for Chinese steel into the US market, but said its effectiveness depended on Mexico providing accurate information on the metals that it imports.
“We urge the US government to continue to press for additional actions to address the many schemes by steel traders to circumvent and evade US trade laws, and to ensure this new arrangement is vigorously and fully enforced,” the group said.
Biden and Lopez Obrador in their statement pledged more US-Mexico cooperation in coming weeks and months “to protect the North American steel and aluminium markets from unfair trade practices”.
