Home Investing News US, Mexico move to thwart China circumvention of US steel, aluminum tariffs

US, Mexico move to thwart China circumvention of US steel, aluminum tariffs

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By David Lawder

WASHINGTON (Reuters) – The U.S. and Mexico on Wednesday announced new steps to fight the circumvention of U.S. tariffs on steel and aluminum by China and other countries that ship products through Mexico, implementing a North American “melted and poured” standard for steel.

The White House said that under a new policy implemented by President Joe Biden, steel product imports from Mexico will be subject to 25% U.S. “Section 232” tariffs unless the steel is documented to have been melted and poured in Mexico, the U.S. or Canada.

Similarly, for aluminum product imports from Mexico to escape the 10% Section 232 tariffs, they must not contain primary aluminum that is smelt or cast in China, Russia, Belarus or Iran.

Importers of the products into the U.S. will need to provide a certificate of analysis to U.S. Customs and Border Protection showing the country of origin for the metals, Biden administration officials said.

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 aluminum, and strengthen North American steel and aluminum 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 U.S. 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 aluminum, electric vehicles, batteries, semiconductors and critical minerals.

But U.S. officials have grown increasingly concerned that Mexico could become a back door for China into the U.S. market, taking advantage of Mexico’s duty-free access through the North American trade pact.

Reuters reported in April that the U.S. officials cautioned their Mexican counterparts against offering incentives to Chinese electric vehicle manufacturers that were scouting out potential factory sites in Mexico.

U.S. Trade Representative Katherine Tai described Wednesday’s action as “fixing a loophole” left by the Trump administration, which imposed the Section 232 tariffs in 2018.

Metal found to have Chinese origin would also be subject to 25% 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% of the 3.8 million tons of steel imported from Mexico, according to U.S. 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 U.S. market, but said its effectiveness depended on Mexico providing accurate information on the metals that 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 group said.

Biden and Lopez Obrador in their statement pledged more U.S.-Mexico cooperation in coming weeks and months “to protect the North American steel and aluminum markets from unfair trade practices.”

Lopez Obrador’s successor, President-elect Claudia Sheinbaum, takes office on Oct. 1 but has begun to name her cabinet.

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