U.S. and Mexico Threaten Tariffs on Steel, Aluminum Imports

• March 6, 2024
• Jennifer Clement

According to U.S. trade data, from 1998-2020 imports of iron and steel (HTS Chapter 72) into the U.S. from Mexico averaged around $2 billion. Then the value of imports started to change:

2020: $1.8 billion
2021: $4.5 billion
2022: $5.4 billion
2023: $3.6 billion

In this video from The Franklin Partnership, contributing author Omar Nashashibi explains why the domestic steel industry’s concerns over changes in import levels has rekindled interest in monitoring mechanisms, and what Washington is discussing to address it.  

U.S. and Mexico Steel Talks Heating Up

When the U.S. and Mexico in 2019 negotiated a settlement of the Section 232 tariffs on imported steel and aluminum, the two sides agreed to a monitoring mechanism as needed to identify a sudden increase of shipments into the U.S.  After roughly one year of talks, Washington is now pressing Mexico to take action to prevent a surge in additional steel and aluminum imports and create a monitoring system for specific types of steel and aluminum. If the two sides do not resolve the issue, we could see the resumption of tariffs on imported steel and aluminum from Mexico and retaliatory tariffs placed on U.S. exports.

Since 2023, at the urging of the steel industry, the U.S. Government has repeatedly raised concerns with the Government of Mexico over the surge in steel and aluminum imports from Mexico into the U.S. In particular, industry is asking for support to identify whether much of those metals are actually originating from third countries, primary China, through a process known as transshipment. 

Starting in 2018, former President Trump began imposing tariffs of 25 percent on steel and 10 percent on aluminum imports into the U.S. The tariffs remain in place today with the exception of several countries, including Mexico, on which the tariffs are suspended under the 2019 agreement.

Producers in the U.S. allege that the cheaper products are entering the U.S. in violation of the 2019 Section 232 tariff agreement and the new NAFTA, known as the USMCA. Goods manufactured in Mexico often enter the U.S. duty-free or with lower margins. However, steel produced in China is still subject to a 25 percent tariff upon entry to the U.S. while imported Chinese aluminum faces a 10 percent tariff rate.

The U.S. entered into formal consultations with Mexico in 2023 over the surge in imports, and now is asking for more concrete steps from Mexico.

In an official readout provided by the Office of the U.S. Trade Representative (USTR) on February 16, 2024, USTR Ambassador Katherine Tai “emphasized that the 2019 Joint Statement on the Section 232 Duties on Steel and Aluminum allows for the reimposition of Section 232 tariffs.” Under the steel and aluminum agreement reached in 2019, Mexico must takes steps to prevent transshipments from third countries, in addition to the U.S. being able to reinstate the tariffs.

The comments in the virtual meeting Ambassador Tai held on February 16 with Mexico’s Secretary of the Economy sent a message that the U.S. could reinstate tariffs on imports from Mexico if the sides cannot reach an agreement. In response, at a press conference on February 27^th, the Mexican Economic Secretary stated that Mexico would impose tariffs on U.S. steel exports if Washington acted first.

Sources in Washington indicate that the U.S. and Mexico could work to reinstate the export monitoring program and are compiling a list of which steel and aluminum products will receive the additional scrutiny. USTR has publicly stated it added rebar to the list, which is used to reinforce concrete in construction projects, and is a top priority for the U.S. steel industry. Rebar was specifically noted by two senators in this letter.

This is an important space to watch that could impact the cost and supply of steel and aluminum in North America and cause disruption between the U.S. and Mexico. We expect in the coming weeks to see more from the USTR on possible next steps, which articles of steel and aluminum are of particular interest, and whether Mexico agrees to restrict or more closely track imports from third countries.

Success of the talks in the coming weeks could mean the difference between tariffs being reinstated or a possible reduction of steel imports into the U.S. through Mexico.

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