The U.S. is moving to curb imports of cheap Chinese steel flowing into the country via Mexico, while Latin American countries raise their own tariffs in a bid to prevent the glut from moving their way instead.
In a joint effort with Mexico, Washington on Tuesday said that steel products entering the U.S. across the southern border that did not originate in North America will be subject to additional tariffs.
“When we act together, we strengthen our position to defend American workers and businesses from global non-market excess capacity,” U.S. Trade Representative Katherine Tai said in a statement.
This comes after Mexico in April announced an increase in duties on steel and other products, and amid a broader U.S. clampdown on imports from China.
Mexico and Canada are exempt from the tariffs of 25% on steel and 10% on aluminum that the U.S. levies under Section 232 of the Trade Expansion Act, which allows for import restrictions on national security grounds.
Washington said these duties now will apply to steel from Mexico unless importers prove that it was melted and poured in North America. Aluminum products with material from China, Russia, Iran or Belarus also will be subject to the tariffs.
The U.S. imported 3.8 million tonnes of steel from Mexico last year, according to a senior U.S. official. Of this, 87% was produced in North America, while the rest came from China or elsewhere. For aluminum products, 6% of imports from Mexico originated outside North America.
Latin American countries also are enacting trade barriers, worried that Washington’s clampdown could leave them facing an influx of Chinese products.
Brazil raised duties on some steel products last month to 25% from between 9% and 12.6%, to be applied to imports that exceed a country-by-country quota.
“This is a measure to preserve jobs and stimulate new investment and modernization,” Trade Minister Geraldo Alckmin said.
Beijing’s efforts to forge closer economic ties in Latin America have made those countries prime export destinations for excess Chinese steel.
China exported 2.7 million tonnes of steel to Brazil last year, up 80% from 2022 after that year’s shipping disruptions and more than triple the 2019 figure, Chinese customs data shows. Exports rose another 44% on the year in the first quarter of 2024, the Latin American Steel Association reports.
The customs data also shows China’s exports to Mexico and Chile growing roughly 20% and 10%, respectively, in 2023.
The influx — equivalent to around 10% of domestic output in Brazil, for example — is forcing local steelmakers to cut back. Brazil’s crude steel production fell 6.5% to 31.87 million tonnes last year, and Ecuador and Paraguay saw declines of more than 10%, the World Steel Association said.
Gerdau, a major Brazilian steelmaker, reported a 41% drop in net profit last year, and temporarily suspended employee contracts at a plant in the state of Sao Paulo.
In Chile, recently imposed provisional tariffs of 25% to 33% on steel products have been welcomed by steel companies like CAP, which responded by reversing a decision to suspend production at one of its facilities.