Mexico tightens restrictions on Chinese steel

Mexico continues to increase tariffs on Chinese imports amid pressure from Washington due to concerns about higher steel and aluminum exports from its southern neighbor and allegations of triangulation.

After her appearance at industry association Canacero's annual conference, economy minister Raquel Buenrostro confirmed that Mexico will update a tariff decree from August last year "to combat unfair trade and all products that arrive subsidized, at prices below production costs."

The current decree defines tariffs of 5-25% on imports from countries that do not have a trade agreement with Mexico until July 2025 on 392 tariff items related to goods that face vulnerability, such as steel, aluminum, plastics and electrical material.

“We reviewed and there are going to be a little more than 540 tariff items, which have to do with different sectors, not only with steel but also with aluminum, textiles, plastics, etc.,” Buenrostro said in reply to a question by BNamericas on the specifics of the update.

The announcement comes a week after the economy ministry imposed provisional compensatory tariffs of 31% on steel nails coming from China, regardless of country of origin, after concluding an antidumping investigation that began in September.

Two weeks before this announcement, Mexico also imposed tariffs of 3.68%-12.35% on steel balls from China, after concluding another antidumping investigation.

The measures came after US trade representative Katherine Tai told Buenrostro during a videoconference in February about an “urgent need” for Mexico to act immediately against “the increase of Mexican exports of steel and aluminum to the US and the lack of transparency regarding Mexico's steel and aluminum imports from third countries.”

That same day, Buenrostro rejected in a separate statement that there is a lack of transparency and reiterated "the willingness to share the information required to identify the traceability of products and combat triangulation in North America."

In 2019, the US agreed to eliminate tariffs former president Donald Trump had imposed under section 232 on those imports from Mexico a year earlier. Tai emphasized in the videoconference with Buenrostro that the 2019 joint statement on section 232 duties on steel and aluminum allows for a reimposition of tariffs.

In late February, the ministry reported in another statement that to strengthen the defense of the steel industry against potential unfair trade practices, “Mexico, together with the United States, are taking actions to control imports of steel and aluminum products, included in section 232.”

“We restored something that was called a mill certificate, which tells us what the certificate of origin is, and also so that the United States has clarity that we have the traceability of our products and we continue to work with them,” Buenrostro said on Thursday while detailing measures to combat unfair steel competition from China.

“We have periodic meetings to exchange statistics and see what needs to be done,” she added. But she also denied that Mexico was triangulating with inputs from China to export manufactured products to the US.

When asked if the political issue hinders negotiations with the US trade office (USTR) on trade disputes, Buenrostro acknowledged that "yes, there is a political background, but what we always seek is to be as objective as possible and work, putting statistics and cold numbers on the discussion table so that the discussion is not perverted."

Buenrostro highlighted that there is no date for the conclusion of the negotiations with USTR, since "these are constructive processes, they are not defining. It is not something that is defined in a single day and when we reach the conclusion, surely at the end of the negotiation, it will be announced with a joint statement between Mexico and USTR."

The honeymoon that during the administration of Andrés Manuel López Obrador seemed to develop with China, despite the trade war with the US, seems to have ended. Meanwhile, Mexico overtook China as the largest exporter to the US in 2023.

However, a recent report from S&P Global Market Intelligence highlights that the increase in Mexican exports to the US has been approximately matched by a simultaneous and closely correlated growth in Mexican imports from China, particularly in the automotive sector.

In addition, some Chinese electric car manufacturers that import to Mexico, such as Chery International and BYD, have expressed interest in installing plants in the country, according to local press reports.

“Chinese investment and exports to Mexico are highly likely to become a headline issue ahead of the 2026 scheduled review of the USMCA [trade agreement],” analysts José Enrique Sevilla-Macip and John Raines wrote in the report.

Trump said during a recent campaign speech in Dayton, Ohio, that if he returns to the White House, he will impose a 100% tariff on cars manufactured in Mexico by Chinese companies, twice as much as he previously said he would impose on cars manufactured south of the border with the US.

“Irrespective of the outcome of the 2024 US presidential election, the next administration is highly likely to demand tougher rules of origin, particularly for the automotive sector – in which the current threshold of regional content value for vehicles is 75%,” the S&P report said.

“So far, Mexico has shown its willingness to accommodate US concerns on rising Chinese exports and investment flows to Mexico, as indicated by the recent imposition of tariffs to selected steel imports from China,” it added.