High Tariffs on Chinese Steel and Aluminum via Mexico
Increased Pressure on China Ahead of Presidential Election
Next Target Expected to Be Chinese Electric Vehicles
The U.S. administration under Joe Biden will impose high tariffs on Chinese steel and aluminum entering the country via Mexico. Following a threefold increase in tariffs on Chinese steel in May, the plan aims to block China's 'loophole' of rerouting exports to the U.S. through Mexico, which has a free trade agreement (FTA) with the U.S. This move is seen as a strategic play to win over voters in the Rust Belt (manufacturing decline region) ahead of the presidential election in four months, with Chinese electric vehicles expected to be the next target.
On the 10th (local time), the Biden administration announced that starting from that day, a 25% tariff will be imposed on steel imported from Mexico, excluding steel produced in the North American region (Mexico, Canada, U.S.). A 10% tariff will be applied to aluminum cast and refined in countries such as China, Russia, Iran, and Belarus.
Earlier, in May, the Biden administration imposed 'bomb tariffs' of up to 100% on Chinese oversupplied products based on Section 301 of the Trade Act, raising tariffs on Chinese steel and aluminum from the previous 0-7.5% to 25%. The U.S. plans to cooperate with the Mexican government, which has signed the United States-Mexico-Canada Agreement (USMCA), to plug this 'loophole' and block the inflow of oversupplied Chinese steel and aluminum into the U.S. market.
Last year, the U.S. imported 3.8 million tons of steel and 105,000 metric tons of aluminum from Mexico, of which 13% and 6%, respectively, were imported from regions outside North America. Most of these are estimated to be of Chinese origin. Although the volume of Chinese steel and aluminum affected by this tariff measure is small, it is largely preventive to curb a surge in imports in the future. China accounts for half of the world's steel production.
This move also serves as a strategic step to win the votes of blue-collar workers ahead of the U.S. presidential election in November, four months away.
White House National Economic Council Director Lael Brainard pointed out, "Chinese steel and aluminum entering the U.S. market through Mexico evade tariffs and undermine our investments," adding, "This harms American workers in states like Pennsylvania and Ohio." She continued, "This measure closes gaps that previous administrations failed to address," emphasizing, "Steel and aluminum will remain the backbone of our economy as we build future industries in the U.S."
Pennsylvania, mentioned by Director Brainard, is one of the seven battleground states that can determine the outcome of the U.S. presidential election. Once a steel industry hub, it is now part of the declining Rust Belt with a high proportion of blue-collar voters. It is also home to the U.S. Steel headquarters, which President Biden previously opposed Japan Steel's acquisition of.
The next target of the U.S. to block China's rerouted exports is expected to be electric vehicles. China is expanding its operations in Mexico to export electric vehicles to the U.S. at low tariffs. The Biden administration raised tariffs on Chinese electric vehicles from the previous 25% to 100% in May when announcing the tariff increase on China.
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