US raises tariff on Mexico metal imports to close loophole China exploited

The Biden administration has taken decisive measures to prevent China from bypassing American tariffs on Chinese steel and aluminium by rerouting these imports through Mexico.

Announced on Wednesday, the US will now impose tariffs on Mexican metals that partially originate from China, closing a trade loophole that has allowed cheap, state-subsidised Chinese metals to avoid existing US tariffs.

The metal move against Mexico

Mexican steel that is melted or poured outside North America and then imported into the US will now face a 25 per cent tariff, a significant shift from the previous duty-free status.

Additionally, Mexican aluminium imports containing metal smelted or cast in China, Belarus, Iran, or Russia will incur a 10 per cent tariff, said Lael Brainard, the director of the White House’s National Economic Council.

Mexico too has acted

Mexico recently raised its own tariffs on steel and aluminium from certain countries. It will now require importers to provide more detailed information regarding the origins of their steel products. These changes are to be implemented immediately.

The Biden administration emphasised the importance of protecting American factories producing steel and aluminium, many of which have recently benefited from new government investments.

“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,” said Brainard.

“When China’s export surges harm our markets, whether directly or via other countries, we will act,” she said.

What’s the volume of metal imported from Mexico?

Last year, 3.8 million tons of steel entered the US through Mexico, with approximately 13 per cent of these imports being melted or poured outside North America, according to White House data, as reported in US media.

Kevin Dempsey, president of the American Iron and Steel Institute, supported the move and urged for stringent enforcement of the rule. “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,” the New York Times quoted Dempsey as saying.

Michael Stumo, CEO of the Coalition for a Prosperous America, felt the tariffs were insufficient in tackling the surge in metal imports from Mexico, which had been restricted as part of a 2019 agreement. NYT quoted Stumo as saying, “Today’s announcement shows that White House foreign policy bureaucrats that negotiated this deal care more about Mexico than about American workers.”

China’s unfair trade practices and American economy

China’s unfair trade practices have long been a matter of concern for many countries including the US. During their visits to China earlier this year, Treasury Secretary Janet L Yellen and Secretary of State Antony Blinken raised the issue of industrial overcapacity with the Chinese government.

Before raising tariffs on metal goods from Mexico originating in countries including China, the US officials collaborated closely with the Mexican government on this measure. They communicated their concerns about unfair Chinese trade practices both publicly and privately with Chinese officials.

In May, the Biden administration tripled tariffs on Chinese steel imported directly into the US. However, this was largely symbolic since high tariffs on Chinese metals have long restricted direct imports. China, which produces roughly half of the world’s steel, exports a portion of its production while consuming most of it domestically.

The US action comes amid an election season and against the backdrop of repeated complaints by American steel companies and auto workers about the increase in steel imports from Mexico, saying they jeopardise their factories.