The White House officials announced on July 10th that the Biden administration would impose higher tariffs on steel and aluminum exported through Mexico by the Chinese Communist Party (CCP), and the tariffs took immediate effect. The government cited written evidence of CCP tariff evasion to justify the new tariffs.
Of concern is that due to China’s real estate crisis, steel originally intended for the Chinese construction industry is being exported through Mexico at extremely low prices. White House National Economic Advisor Lael Brainard told reporters that a 25% tariff will be imposed on Mexican steel cast or melted outside of North America, which used to enter the United States duty-free. Ms. Brainard stated that a 10% tariff would be imposed on aluminum imported from Mexico but cast or smelted in China, Russia, Iran, or Belarus.
She said, “Chinese steel and aluminum entering the US market through Mexico have evaded tariffs, undermining our investments, and harming American workers in states like Pennsylvania and Ohio.” “When Chinese exports harm our market, whether directly or through other countries, we will take action.”
The new tariffs are imposed on top of the tariffs set during President Donald Trump’s tenure in 2018. Mexico has requested importers to provide new country of origin reports, applying to a large volume of metals transshipped from China. In 2023, the US imported around 3.8 million tons of steel from Mexico, with approximately 13% cast or melted outside of North America. The US also imported 105,000 tons of aluminum from Mexico, with 6% cast or smelted abroad.
Chinese steel exports are unusually cheap due to significant subsidies, pushing competitors out of the market. The decrease in US steel and aluminum plants makes the country more vulnerable in emergencies like war. If the CCP suddenly decides to reduce its supply to the US or tries to impose monopoly pricing, the US will face higher prices.
While increased tariffs could lead to higher prices for domestic manufacturers and consumers, they will also boost the US government’s revenue, potentially lowering income taxes or repaying national debt. Tariffs help maintain operations in the US steel and aluminum industry, create job opportunities, and develop the country’s industrial ecosystem.
This is crucial in certain emergency situations where the US relies more on domestically produced goods rather than products transshipped from China that could be cut off or products denied entry into the US market midway.
For instance, if a conflict between the US and China arises over Taiwan, would the CCP allow Chinese-produced steel to be shipped to the US? It’s not worth risking lives.
The Alliance for American Manufacturing released a statement, with its chairman, Scott Paul, calling the new tariffs a step towards combating China’s predatory trade practices and making North American steel trade more equitable. He emphasized, “We cannot allow China and other countries to exploit our neighbors’ trade to evade US trade enforcement.”
The Coalition for a Prosperous America represents some US manufacturers affected by imports of Mexican steel and objects to imports not covered by the new tariffs. On July 10th, the CPA stressed the need to expand tariffs to include “pipes, steel rods and wires, and other steel products shipped in massive quantities from Mexico to the US duty-free, far exceeding the promised levels.”
The CPA states that Mexico “continues to openly violate the 2019 steel trade agreement,” where “the US agreed to lift 232 tariff rates, while Mexico agreed to limit steel exports to levels between 2015 and 2017.”
Nonetheless, the tariffs are a step in the right direction, targeting only a portion of Mexican metals manufactured in China. However, this at least establishes a precedent and perhaps the first time tariffs have been imposed on products transshipped through a third country. This will make it easier for the US to include clauses in future tariffs applicable to any company from any hostile country, regardless of their location.
The CCP, in its anti-US stance, can order Chinese companies globally to cease exports to countries they dislike. Hence, relying on these companies in emergencies is unwise. Imposing tariffs on them will encourage securely importing goods from friendly countries, protect and develop US supply chains, and create more high-quality job opportunities.
[End of the edited and translated article. For reference, here is the information about the original author:
Author Introduction:
Anders Corr holds a Bachelor’s and Master’s degree in political science from Yale University (2001) and a Ph.D. in government from Harvard University (2008). He is the principal of Corr Analytics Inc. and the publisher of the Journal of Political Risk. He has conducted extensive research in North America, Europe, and Asia, and has authored books such as “The Concentration of Power” (2021) and “Great Powers, Grand Strategies.”]