Using a North American “melted and poured” standard for steel, the United States and Mexico on Wednesday unveiled new measures to combat China and other nations that export goods via Mexico evading U.S. tariffs on steel and aluminium.

According to the White House, imports of steel products from Mexico will henceforth be subject to 25% U.S. “Section 232” tariffs unless the steel can provide proof that it was melted and poured in Mexico, the U.S., or Canada. This new policy was put in place by President Joe Biden.

In a similar vein, Mexican imports of aluminium products must not include primary aluminium that is smelted or cast in China, Russia, Belarus, or Iran in order to avoid the 10% Section 232 duties.

According to representatives of the Biden administration, importers of the goods into the United States will have to give U.S. Customs and Border Protection a certificate of analysis proving the metals’ nation of origin.

In a joint statement, Mexican President Andres Manuel Lopez Obrador and Vice President Joe Biden declared that Mexico has decided to mandate that importers of steel goods entering its territory furnish additional details on the items’ source of origin.

In a statement issued by the White House, the presidents declared that “both countries will implement policies to jointly prevent tariff evasion on steel and aluminium, and strengthen North American steel and aluminium supply chains.”

In his campaign for reelection in November, Biden has courted the support of union members, especially the United Steelworkers, in opposition to Japan’s Nippon Steel’s purchase of Pittsburgh-based U.S. Steel.

Concerns over China’s surplus industrial capacity flooding international markets with exports in the face of poor local demand have led to the new import rules. It follows Biden’s increase in duties on a wide range of crucial Chinese products in May, including semiconductors, electric cars, batteries, steel, and vital minerals.

However, American authorities are becoming more and more worried that Mexico, which enjoys duty-free access to the United States market thanks to the North American trade agreement, may be used as a back door by China to reach the American market.

According to reports from April, Mexican officials received a warning from their American colleagues not to provide incentives to Chinese electric car manufacturers who were looking for possible locations for their factories in Mexico.

The decision taken on Wednesday was characterised by U.S. Trade Representative Katherine Tai as “fixing a loophole” created by the Trump administration, which had imposed the Section 232 tariffs in 2018.

In addition, metal determined to be of Chinese origin would be subject to 25% Section 301 duties—a rate that Biden raised in May.

According to U.S. Census Bureau data, the percentage of steel imports from Mexico that originated outside of the country in 2023 was quite low, accounting for only over 13% of the total 3.8 million tonnes of steel imported from Mexico.

However, a representative of the Biden administration said that the new regulations were “forward-looking,” designed to prevent an anticipated spike in imports as China’s steel-consuming industries, including real estate, suffer.

Industry organisation American Iron and Steel Institute praised the move to cut off a Chinese steel supplier’s path to the American market, but stated that the measure would only be successful if Mexico supplied precise data about the metals it imports.

“We urge the U.S. government to continue to press for additional actions to address the many schemes by steel traders to circumvent and evade U.S. trade laws, and to ensure this new arrangement is vigorously and fully enforced,” the organisation stated.

More collaboration between the United States and Mexico is promised in the upcoming weeks and months by Biden and Lopez Obrador “to protect the North American steel and aluminium markets from unfair trade practices.”

President-elect Claudia Sheinbaum, who will succeed Lopez Obrador on October 1st, has started appointing her government.

(Adapted from SCMP.com)

Categories: Economy & Finance, Geopolitics, Regulations & Legal, Strategy