On Wednesday (July 10), the United States and Mexico announced new measures to combat Chinese evasion of U.S. steel and aluminum tariffs by exporting products through Mexico to the United States. The aim is to keep cheap metal produced in China out of the U.S. market and protect domestic production.
The White House announced that under a new policy implemented by President Biden, steel products imported from Mexico will be subject to a 25% U.S. “Section 232” tariff unless there is documentation proving that the steel was melted and cast in Mexico, the U.S., or Canada.
Similarly, aluminum products imported from Mexico must not have been smelted or cast in countries including China to avoid a 10% tariff under Section 232.
White House economist Lael Brainard told reporters on Tuesday that aluminum from Mexico smelted or cast in China, Belarus, Iran, or Russia will be subject to a 10% tariff.
Following the COVID-19 pandemic, the United States has been readjusting some of its supply chains to distance itself from China. However, many products originally from China have made their way to Mexico and entered the U.S. under the tariff-free access granted by the North American Free Trade Agreement (NAFTA).
Officials from the Biden administration stated that importers bringing these products into the U.S. will need to provide customs and border protection with an analysis certificate detailing the origin of these metals.
In a joint statement, President Biden and Mexican President Andrés Manuel López Obrador announced that Mexico has agreed to require more information on the origin of cross-border steel products imported into the country.
“To enhance transparency on the origin of imported products, Mexico is asking importers to provide more information about the origin of steel products,” the two presidents stated in a declaration issued at the White House. “Both countries will implement policies to prevent the evasion of steel and aluminum tariffs and strengthen the North American steel and aluminum supply chain.”
As Biden imposes a new round of import tariffs, concerns are growing about China’s industrial overcapacity flooding global markets amidst weak domestic demand.
In response to a surge of cheap electric vehicles manufactured in China, the European Commission notified car manufacturers on June 12 that they will impose additional tariffs of up to 37.6% on imported Chinese electric cars starting next month.
Meanwhile, the Biden administration announced a month prior to increase tariffs on Chinese electric vehicles from 25% to 100%.
On May 14, Biden imposed tariffs on a range of strategic materials from China, including steel, aluminum, electric cars, batteries, semiconductors, and key minerals, to address China’s unfair trade practices and mitigate the damage caused while protecting American workers and businesses.
Metals found to be originating from China will also be subject to a 25% Section 301 tariff.
U.S. officials are increasingly concerned that Mexico, which enjoys tariff-free access under the North American Free Trade Agreement, could become a backdoor for China to enter the U.S. market.
In April, Reuters reported that U.S. officials warned Mexican authorities not to provide incentives to Chinese electric car manufacturers scouting potential factory locations in Mexico. Prior reports cited by The Wall Street Journal mentioned that Shenzhen-based automaker BYD was searching for a site in Mexico to export cars to the U.S. to avoid high import tariffs on cars directly imported from China.
According to data from the U.S. Census Bureau, in 2023, the amount of steel imported from Mexico that originates elsewhere was small, accounting for around 13% of the 3.8 million tons of steel imported from Mexico. However, a Biden administration official stated that the new requirements are “forward-looking” to prevent an anticipated surge of imports amidst China’s steel-consuming industries like real estate facing challenges.
Imports from Mexico have been on the rise since 2019.
Biden and López Obrador pledged in their statement to engage in further cooperation in the coming weeks and months to “protect the North American steel and aluminum markets from unfair trade practices.”
López Obrador’s successor, President-elect Claudia Sheinbaum, will take office on October 1, but she has already begun appointing cabinet members.
Ahead of the November elections, protecting American workers and industries has been a focal point of the Biden administration, positioning Biden as one of the most labor-supportive presidents in U.S. history.
U.S. Trade Representative Katherine Tai stated in an agency release regarding tariffs that domestic steel and aluminum production is “critical” to national security interests in the United States.