Mexico responds in anger to metal duties

The imposition of tariffs by the United States on imports of steel and aluminium has prompted anger in Mexico, which is the largest buyer of American aluminium and the second-largest buyer of American steel.

However, with Mexico also a major exporter of these metals to the US ($1.7 billion worth of Mexican steel and iron and $1 billion worth of Mexican aluminium were sold to the US last year), the tariffs will harm Mexico’s economy.

National iron and steel association Canacero said the duties could cost the Mexican economy nearly $2 billion in lost trade annually. “These tariffs are a pointless strategy and do not contribute to create a constructive environment in the North American region. Contrary to the opinion on which this decision was based, Mexico does not pose a threat to the US national security,” the association said.

The US exported $4.5 billion worth of steel and $3.8 billion worth of aluminium to Mexico in 2017. Some of these products will now face retaliatory Mexican duties. The Mexican economy ministry has released a statement saying, “Faced with tariffs imposed by the US, Mexico will impose equivalent measures to various products such as flat steel (hot and cold coil, including coated and various tubes). It added that additional retaliatory duties on US exports of lamps pork legs and shoulders, sausages and food preparations, apples, grapes, blueberries, various cheeses and more would be imposed. It has yet to release the duty rates to be levied on the products, but said they would yield revenues “comparable” to the amount generated for Washington by its metal duties on Mexico. “This measure will be in force until the US government eliminates the imposed tariffs,” the ministry note said.

After the announcement on Thursday May 31, several companies listed on the Mexican Stock Exchange, including Industrias CH (steelmaking), Grupo México (mining), Lala (dairy products), Kuo (rubber manufacturing) and many others, saw their share prices drop 2.6-8.1%.

Ildefonso Guajardo, Mexico’s secretary of the economy, said the tariffs represent a “lose-lose situation” for both parties and create a “tense environment” for the ongoing North American Free Trade Agreement negotiations.

He added that the Mexican government had to respond to these “inadequate and unjustified measures.”

Guajardo noted that the costs would be felt across North America. “Aluminium and steel are goods that contribute to boost the competitiveness of several strategic sectors which are highly embedded in North America, like the automotive, aerospace, electric and electronic industries,” he said.

Mexican President Enrique Peña Nieto and Canadian Prime Minister Justin Trudeau agreed during a Thursday morning phone call to maintain communication and “work in coordination to defend a rule-based and free international commerce,” according to a Mexican government note.

For Mexico, this means trade retaliation against the US. “The country is ready to impose tariffs on several US products which will be equivalent to the amount of damage caused, and they will stay in force for as long as our neighbors keep the steel and aluminium ones,” Guajardo said.

The Mexican private sector representative on the Nafta renegotiating committee, Moisés Kalach, said that the announcement adds complexity to the talks, about which there had been optimism before this latest row. “It is not easy to negotiate with a commercial partner that, on the one hand wants to strike an agreement and on the other sets unjustified tariffs,” he said.

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