New US tariffs seal loophole for Chinese metal suppliers



US raises tariff on Mexico metal imports to close loophole China exploited  – FirstpostThe United States has introduced new tariffs on steel and aluminium products shipped from China via Mexico, sealing a loophole that Chinese suppliers have exploited since 2018. Under the new regulations announced by President Joe Biden, steel products imported from Mexico will be subject to a 25% tariff unless they undergo the process of melting and pouring within Mexico, Canada, or the US. Aluminium goods from Mexico will face a 10% tariff if they contain primary aluminium smelted or cast in China, Russia, Belarus, or Iran.

Lael Brainard, director of the US National Economic Council, explained that these regulations rectify an oversight by the previous administration, which allowed Chinese products to circumvent tariffs by being routed through Mexico.

Chinese state media and analysts have downplayed the impact of these tariffs, suggesting minimal effects on China's metal exports. The Global Times described the tariffs as symbolic, given the US is not a significant market for Chinese steel and aluminium products. In 2023, only 1% of Chinese steel and 4.5% of Chinese aluminium exports went to the US.


The recent actions by the Biden Administration are seen by some experts as an attempt to politicize trade and economic matters. These experts highlight that in the previous year, a mere 1% of Chinese steel products found their way to the US market. Furthermore, less than 3% of China's steel output was sold to North American countries, including Mexico, Canada, and the US.

In 2023, a report from the Shanghai Metals Market, a reputable market research firm, indicated that only 4.5% of China's aluminium exports were directly sold to the US. The report suggests that any new tariffs imposed by the US are likely to have a minimal and temporary effect on Chinese steel and aluminium exports. This is because China has the potential to diversify its metal exports to various emerging countries.

A writer from Zhejiang, known by the pseudonym "Casual Finance," stated in a recent article that China doesn't have significant trade disputes with developing nations. Even minor conflicts, if any, can be swiftly resolved. The writer emphasized the high degree of mutual benefit and complementarities between China and developing countries.

He emphasized that the immediate priority for China is to secure its economic relationship with the European Union, especially in light of the recent tariffs imposed by the EU on Chinese electric vehicles. Conversely, some argue that the more critical concern for Chinese steel manufacturers at present is the dwindling domestic demand, a consequence of China's ongoing property crisis.

In March 2018, the administration under President Trump levied tariffs of 25% and 10% on Chinese steel and aluminium imports, respectively. This action was taken under the authority of Section 232 of the Trade Expansion Act of 1962. This section empowers the US Secretary of Commerce to carry out thorough investigations to assess the impact of any imported goods on the national security of the United States.

In May 2019, the US, Canada, and Mexico agreed to lift steel and aluminium tariffs. In response, retaliatory tariffs on US goods were removed. Consequently, numerous Chinese steel and aluminium producers established operations in Mexico, leveraging the benefits of the US-Canada-Mexico free-trade agreement.

The Department of Commerce reported a 72% increase in US steel imports from Mexico in 2022 compared to the 2015-2017 average. Senators Tom Cotton and Sherrod Brown proposed the "Stop Mexico’s Steel Surge Act" in March, advocating for a 25% tariff reinstatement on Mexican steel. They criticized Mexico's failure to uphold its 2019 commitment to transparency in steel and aluminium imports. Recently, the US announced a deal with Mexico to safeguard its steel and aluminium industries from foreign tariff evasion.

Bloomberg reported US officials stating that in 2023, the US imported approximately 3.8 million tons of steel from Mexico, with 13% originating outside North America, now subject to tariffs. US aluminium imports from Mexico totalled 105,000 metric tons, with 6% processed overseas. Consequently, only 494,000 tons of Mexican steel imports, equating to 1.8% of the US's total steel imports in 2023, are impacted by the new tariff measures.

In 2023, the US Census Bureau reported that the US's primary steel imports were from Canada (24.4% or 6.245 million metric tons), Mexico (14.9% or 3.8 million tons), Brazil (14% or 3.58 million tons), South Korea (9.3% or 2.39 million tons), and Japan (4.2% or 1.08 million tons).

According to China Customs, the primary recipients of Chinese steel exports were South Korea, Vietnam, the European Union, the Philippines, and Thailand, with the US ranking 18th. Despite South Korea's role in importing Chinese steel and exporting it to the US, it is expected to remain unaffected due to its quota-based export system to the US.



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