Mexico Warns That It May Retaliate If Section 232 Quotas or Tariffs Imposed
A trade group for the Mexican steel industry, CANACERO, warned that Mexico likely will retaliate against U.S. steel exports if the U.S. reimposes 25% tariffs on Mexican steel -- and the U.S. exports much more steel to Mexico than vice versa.
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The group's Feb. 24 press release noted that a bipartisan group of senators asked the administration to either get the Mexican government to agree to quotas, or to reimpose 25% tariffs on Mexican steel exports (see 2302160001).
The senators said a factory that made steel conduit closed as a result. That factory is in California, and the senators said 200 steel jobs were lost.
The Mexican trade group said in an email that the Mexican Senate passed a resolution asking the Mexican Economy Ministry to start gathering information about imports of U.S. steel products so that it could be prepared for retaliatory measures "in the event that the United States of America decides to impose tariffs or other unjustified protectionist measures.”
While the senators did note that conduit imports from Mexico have increased 577% since the pre-Section 232 tariff period, they also said that total iron and steel imports are up 73% and semi-finished and long product imports are up 120%.
The Mexican Senate was responding to a letter from 13 U.S. senators who asked U.S. officials to hold “consultations” with Mexico over an alleged “surge” in Mexican steel exports in one small category. Under the 2019 agreement between the U.S. and Mexico that lifted Section 232 tariffs on Mexico in anticipation of the signing of the USMCA, “consultations” are all that are necessary for one country to reimpose 25% steel tariffs on another.
CANACERO said Mexican steel is only 3.3% of U.S. consumption -- compared with about 2% in 2017 -- and that the increase is because Mexican steel has replaced Russian steel. CANACERO said, "There has been an especially dramatic change in semi-finished steel. Russia has gone from 28% of total U.S. imports in 2017 to just 6% last year while over the same period, Mexico has gone from 11% to 35%."
"U.S. Senators appear to be threatening to disrupt efforts by both countries to cooperate in shortening supply chains to enhance national security, economic growth and employment," the trade group said.
The U.S. could reimpose 25% tariffs on Mexican steel if U.S. officials held consultations and were dissatisfied with the result. The agreement that resolved the Section 232 tariffs among NAFTA countries said tariffs would have to be limited to the individual product that had seen a surge in exports.
The Office of the U.S. Trade Representative said there has been no decision about consultations, but that the letter is being reviewed.
Sen. Tom Cotton, R-Ark., the lead on the letter, did not respond to a request for comment. A spokesman for Sen. Sherrod Brown, D-Ohio, the lead Democrat on the letter, responded to the development by saying: "Sen. Brown has always fought for the U.S. to enforce our trade laws. It’s clear that the surge in iron and steel imports, including steel conduit, is out of step with the 2019 agreement between the U.S. and Mexico and has already resulted in the loss of American jobs. Our letter calls for the Department of Commerce and USTR to consider a range of solutions to the unacceptable surge in Mexican steel, with the reapplication of Section 232 tariffs and quotas as among several options, if the Mexican government refuses to remedy the situation."
Even though the jobs mentioned in the letter are in California, no California senators signed the letter.