Mexico retaliates, hits US goods with tariffs

Mexico has slapped tariffs of 15-25% against steel and agricultural goods imported from the United States effective Tuesday June 5.

The duties come in retaliation to President Donald Trump’s administration implementing Section 232 tariffs against Mexican product - 25% for steel and 10% for aluminium, according to a Tuesday notice in Mexico’s Federal Gazette.

“Mexico has the right to impose measures that have commercial effects substantially equivalent to those of the measures adopted by the US,” according to the notice, which is based on a decree signed a day earlier by Mexican President Enrique Peña Nieto, Mexican Finance Secretary Jose Antonio Gonzalez and Mexican Economy Secretary Ildefonso Guajardo Villarreal.

That tariffs went into effect on the date of their publication in the gazette, which is roughly the equivalent of the US Federal Register. They will remain in place until the US ceases to apply tariffs on Mexican steel and aluminium exports.

Mexico’s duties target a wide range of US products, including steel as well as whiskey and bourbon, and run as high as 25%. US apples were hit with tariffs of 20%, with US pork getting duties of 15-20%, according to the notice. The duties on the latter could hit farmers, given that the US accounted for 89.2% of Mexican pork imports from 2010-17 and 33.3% of the country’s overall pork consumption, according to the notice.

“Given the urgency of preventing the pork market from being stabilized, improving supply levels and protecting consumers, it is necessary to diversify external supply options,” the notice read.

Mexico had threatened to retaliate against the US Section 232 tariffs last week, shortly after the Trump administration decided not to extend Section 232 exemptions for the European Union, Canada and Mexico.

The US’ North American Free Trade Agreement (Nafta) partner has also said it will lodge a complaint at the World Trade Organization over the tariffs, just like the European Union.

Canada has also threatened to retaliate against a broad array of imports from the US. The Canadian measures - which target not only US steel and aluminium products but also those of agricultural products and manufactured goods – are slated to go into effect on July 1 unless Trump back downs on the Section 232.

The US launched its Section 232 investigations into steel and aluminium imports on national security grounds. But Canada and Mexico see the tariffs as an attempt to instead get concessions from them in ongoing Nafta talks.

American Metal Market’s hot-rolled coil index is roughly flat at $44.03 per hundredweight ($880.60 per ton) as steel market participants try to assess the potential fallout of a brewing trade fight between the US and its traditional allies and trading partners.

Mexico is one of the top suppliers of foreign steel to the US, accounting for 9.2% (nearly 3.16 million tonnes) of the 34.47 million tonnes that landed on domestic shores in 2017, according to data from the US Commerce Department’s Enforcement and Compliance division.

Mexico is also one of the biggest destinations – behind only Canada - for US steel exports, taking in nearly 3.74 million tonnes (39.1%) of the total 9.55 million tonnes of product shipped abroad by domestic mills last year, Commerce data indicate.

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