The U.S. government is taking steps to prevent countries like China from bypassing tariffs by routing steel and aluminum products through Mexico.
On the 10th, President Joe Biden announced that a “melt and pour” requirement would be implemented for steel materials and products exported from Mexico to the U.S. For Mexican steel products that have been melted and poured in Mexico, Canada, or any country other than the U.S., a 25% tariff will be imposed according to Section 232 of the Trade Expansion Act.
Melt and pour refers to the process of making steel from molten iron. The implementation of the melt and pour requirement is to prevent steel materials made in third countries from being imported into Mexico for additional processing and then exported to the U.S. tariff-free. Biden clarified that for steel products to be exempt from tariffs under Section 232, they must be melted and poured in Mexico, Canada, or the U.S.
The U.S. previously imposed 25% and 10% tariffs on steel and aluminum, respectively, in 2018 using Section 232 of the Trade Expansion Act. This act gives the President the authority to restrict the import of items deemed harmful to national security.
At the time, the U.S. excluded steel product imports from Canada and Mexico since the countries had signed a Free Trade Agreement (FTA), believing that the two countries would not threaten national security.
However, since the imposition of Section 232 tariffs, steel imports to the U.S. through Mexico significantly increased, prompting a reconsideration of the previous exclusion.
Biden emphasized, “Such measures will provide an effective and long-term alternative to address all contributions threatening national security from steel product imports from Mexico by suppressing imports, limiting transshipment, and curbing excess steel capacity and production.” He added, “The U.S. will monitor the implementation and effects of the measures agreed with Mexico to address our national security needs and may reconsider this decision as appropriate.”
A smelt and cast requirement will be imposed on aluminum products imported from Mexico. If these products are smelted or cast in China, Russia, Iran, or Belarus, a 10% tariff will be imposed.
In 2023, the U.S. imported approximately 3.8 million tons of steel from Mexico, with about 13% (480,000 tons), produced in third countries. The U.S. imported 105,000 tons of aluminum products from Mexico in 2023, 6% of which were smelted or cast in third countries. Although these figures do not take a significant portion of the U.S.’s total imports, the measure is a preemptive step to block Chinese steel and aluminum from flooding the U.S. market.
There have been concerns in the U.S. that Mexico, which has signed an FTA and can export to the U.S. tariff-free, could become a detour route for China’s exports.
Importers of steel and aluminum products must provide documents to U.S. Customs about the origin of the imports. To be exempt from tariffs, they must prove that they originated from Mexico.
While this measure primarily targets China, South Korea could also be affected as it exports some steel products to the U.S. through Mexico. It has been reported that POSCO is currently processing products such as automotive steel plates in Mexico for export to the U.S.
Brian Deese, White House National Economic Council Director, stated this measure corrects a major loophole left by the previous administration. It also emphasizes the importance of steel and aluminum in the U.S. economy.
According to Bloomberg News, the Biden administration officials stated that China would not be surprised by the new tariff imposition, as the U.S. has long made it clear that steel is a very important domestic industry.