Section 232 tariffs unaltered by US-Mexico trade agreement

A preliminary trade deal between the United States and Mexico will not affect the former’s existing Section 232 tariffs on steel and aluminium imports, Mexico’s Secretary of Economy Ildefonso Guajardo has said.

August 29, 2018

Since June, Mexican steel exports into the US have been subjected to a 25% duty while aluminium shipments incurred a 10% tariff. These followed the US’s Section 232 investigation on whether such imports posed a national security threat.

But the matter will continue to be discussed and the Mexican government is expecting another solution to be reached when the new trade deal – to revamp the North American Free Trade Agreement (Nafta) – is finalized.

“We are open to the possibility of increasing dialogue and searching for another solution when the signing of this deal gets closer,” Guajardo told a press conference on Monday August 27. This could continue until the end of the year, he added.

Mexican steel association Canacero recently said that the country was discussing with the US government the possibility of quotas replacing the steel tariff.

The preliminary US-Mexico trade deal, which was announced on Monday, contains a key provision calling for the increase of the minimum percentage of materials sourced from Mexico and the US for the production of vehicles.

But around 70% of Mexican automotive exports to the US already fulfill the new rules of origin and will continue to not be subjected to tariffs, according to Guajardo.

Some 30% of the country’s vehicle exports to US will need to adjust to the new agreement. In the meantime, they face a 2.5% duty, he added.

“If this tariff is fully passed on to end consumers, vehicle prices will increase by 2.5%. While the US economy remains solid, we expect only a marginal impact in demand,” Janneth Quiroz Zamora, an analyst at Mexican financial group Monex, said in a report on Tuesday.

Mexico expects Canada to become part of the trade deal as well. Mexico’s Secretary of Foreign Affairs Luis Videgaray says this could happen by the end of this week.

But he added that Mexico was prepared to move on with the deal even if there was no agreement with Canada.

“We are putting all our efforts toward convincing Canada to remain a part of the agreement,” Videgaray said.

Mexico’s automotive sector accounts for around 10.6% of the country’s steel consumption, according to Canacero.

The new trade agreement is to be revised every 16 years under the new terms, with negotiations to occur after six years.