The United States has imposed tariffs on steel and aluminum products originating from China via Mexico, closing a loophole that had allowed Chinese metal suppliers to evade US tariffs since 2018.
Steel products from Mexico will face a 25% tariff, unless they are melted and poured in Mexico, Canada or the US, according to the new rules announced by US President Joe Biden on Wednesday.
Aluminum products from Mexico must not contain primary aluminum that is smelted or cast in China, Russia, Belarus or Iran, or they will face a 10% tariff.
Lael Brainard, director of the National Economic Council of the US, said Wednesday that the new rules are aimed at fixing a major loophole that the previous administration failed to address, and that countries like China rely on to avoid US tariffs by shipping their products through Mexico.
However, Chinese state media and commentators said the new US tariffs will only have a limited impact on China’s metal exports.
The newly announced tariffs are largely symbolic as the US is not a major market destination for Chinese steel and aluminum products, the Global Times, a mouthpiece of the Chinese Communist Party, said in a commentary on Thursday.
With its latest move, the Biden Administration is only demonstrating its efforts to politicize trade and economic issues, some experts said in the report.
The experts said only about 1% of Chinese steel products got shipped to the US last year while less than 3% of China’s steel products ended up sold to Mexico, Canada and the US.
Only 4.5% of China’s aluminum exports got sold directly to the US in 2023, according to a report published by the Shanghai Metals Market, a market research company.
The report said any new US tariffs will have only a small and short-term impact on Chinese steel and aluminum exports as China can diversify its metal exports to some emerging countries.
“China has no major trade disputes with developing countries. Even if there are some small conflicts, they can be resolved quickly,” a Zhejiang-based writer using the pseudonym “Casual Finance” says in an article published on Thursday. “China and developing countries are highly mutually beneficial and complementary.”
He added that a more urgent matter for China now is the need to stabilize its economic ties with the European Union, which has recently imposed tariffs on Chinese electric vehicles.
Others said weak domestic demand, caused by China’s property crisis, is now a more pressing issue for Chinese steel makers.
Pressure from US lawmakers
In March 2018, the Trump administration imposed 25% and 10% tariffs on imports of Chinese steel and aluminum products, respectively, in accordance with Section 232 of the Trade Expansion Act of 1962, which authorizes the US commerce secretary to conduct comprehensive investigations to determine the effects of imports of any article on the national security of the US.
In May 2019, the US said it reached an agreement with Canada and Mexico to remove the Section 232 tariffs for steel and aluminum imports from the two neighboring countries, in exchange for their removal of all retaliatory tariffs they had imposed on American goods.
Since then, many Chinese steel and aluminum suppliers have set up units in Mexico to benefit from the US-Canada-Mexico free-trade agreement.
According to the Department of Commerce, US imports of steel from Mexico were up 72% in 2022 from the average level in 2015-2017.
In March this year, US Senators Tom Cotton and Sherrod Brown introduced a bipartisan bill called Stop Mexico’s Steel Surge Act and called for reinstating the 25% tariff on Mexican steel imports.
They said Mexico agreed in 2019 that it would ensure greater transparency regarding steel and aluminum imports from third countries, but the country failed to follow through.
On Wednesday, the US said it reached a deal with Mexico to protect its steel and aluminum sectors from foreign tariffs circumvention.
US officials told Bloomberg that the US imported about 3.8 million tons of steel from Mexico in 2023, 13% of which came from outside North America and would now be subject to the tariff. They said the United States’ imports of aluminum products from Mexico amounted to 105,000 metric tons last year, 6% of which was smelted or cast abroad.
It means that only 494,000 tons of steel imported from Mexico, or about 1.8% of total US steel imports in 2023, are affected by the new tariff actions.
In fact, the US mainly imported steel from Canada (6.245 million metric tons, or 24.4% of total), Mexico (3.8 million tons, 14.9%), Brazil (3.58 million tons, 14%), South Korea (2.39 million tons, 9.3%) and Japan (1.08 million tons, 4.2%) in 2023, according to the US Census Bureau.
Last year, the top five destinations of Chinese steel exports were South Korea, Vietnam, the European Union, the Philippines and Thailand, according to China Customs. The US was the 18th largest market for Chinese steel products.
Although South Korea is both a major importer of Chinese steel and a major exporter of steel to the US, it is unlikely to be affected by the US-China trade war as its steel exports to the US follow a quota system.
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