Biden Announces Tariffs on Chinese Metals Routed Through Mexico

by Pelican Press
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Biden Announces Tariffs on Chinese Metals Routed Through Mexico

The Biden administration took steps on Wednesday to prevent China from circumventing American tariffs on Chinese steel and aluminum by routing those imports through Mexico.

The administration said it would impose tariffs on imports of Mexican metals that are partially made in China. American officials said the move would close a trade loophole that has allowed cheap, state-subsidized Chinese metals to circumvent existing U.S. tariffs.

The United States will now impose a 25 percent tariff on Mexican steel that is melted or poured outside of North America before being turned into a finished product. Previously, that steel would have entered the country duty free.

Mexican aluminum coming into the United States will face a tariff of 10 percent if it contains metal that has been smelted or cast in China, Belarus, Iran or Russia, said Lael Brainard, the director of the White House’s National Economic Council.

Mexico, which recently increased its own tariffs on steel and aluminum from certain countries, will require importers to provide more information about where their steel products come from, the announcement said. The changes will take effect immediately.

Officials in the Biden administration said the United States wanted to protect American factories that produce steel and aluminum, including those that have recently received new investments from government funds.

“Chinese steel and aluminum entering the U.S. market through Mexico evades tariffs, undermines our investments, and harms American workers in states like Pennsylvania and Ohio,” Ms. Brainard said.

“When China’s export surges harm our markets, whether directly or via other countries, we will act,” she added.

Administration officials said that 3.8 million tons of steel came into the United States through Mexico last year, and that overall steel imports from Mexico had been on the rise. About 13 percent of Mexican steel imports into the United States last year were melted or poured outside of North America, according to the White House.

Kevin Dempsey, the president of the American Iron and Steel Institute, which represents metal makers, welcomed the action, and called for vigorous enforcement of the rule.

“We urge the U.S. government to continue to press for additional actions to address the many schemes by steel traders to circumvent and evade U.S. trade laws,” he said.

Michael Stumo, the chief executive of the Coalition for a Prosperous America, which represents domestic manufacturers, said the tariffs didn’t go far enough to address rising imports of metals from Mexico, which the countries had agreed to limit as part of a 2019 deal.

“Today’s announcement shows that White House foreign policy bureaucrats that negotiated this deal care more about Mexico than about American workers,” Mr. Stumo said.

Biden administration officials said they had worked closely with the Mexican government on the measure, and that they had been clear with Chinese officials both publicly and privately about their concerns about unfair Chinese trade practices. In visits to China earlier this year, Treasury Secretary Janet L. Yellen and Secretary of State Antony J. Blinken had raised the issue of industrial overcapacity with the Chinese government.

In May, the Biden administration tripled tariffs on Chinese steel that is imported directly into the United States. But the measure was mostly symbolic, given that the United States has long had high tariffs on Chinese metals, largely blocking direct imports.

In a speech on Wednesday, Jay Shambaugh, Treasury’s under secretary for international affairs, warned about the risk that China’s excess industrial capacity poses to the global economy by distorting markets and undercutting fair competition.

“In today’s interconnected economy, such overcapacity can also lead to the concentration of supply chains in ways that ultimately reduce economic resilience,” Mr. Shambaugh said in remarks at the Council on Foreign Relations. “While periodic surpluses can occur within natural business cycles, we are concerned about structural overcapacity, which stems from persistent patterns of overinvestment and is facilitated by extensive state support.”

Mr. Shambaugh argued that China has been employing the same strategy that it did with steel in overproducing and exporting cheap green energy technology products and semiconductors. He pointed out that China’s “government guidance funds” dwarf the federal money being invested through the U.S. CHIPS & Science Act and that it was propping up firms that would otherwise be going out of business.

“Addressing these challenges may warrant our taking defensive action to protect our firms and workers — and the traditional tool kit of trade actions may not be sufficient,” Mr. Shambaugh added. “More creative approaches may be necessary to mitigate the impacts of China’s overcapacity.”

China produces roughly half of the world’s steel, consuming much of it domestically but exporting the rest. The Chinese property sector, which is a major consumer of steel, has been struggling with a downturn in recent years, though the Chinese auto sector, another major consumer, has seen its global exports surge.

The United States will separately continue discussions with Mexico about more general surges in imports of steel from the country, officials said. American steel companies and autoworkers complained that an increase in steel imports from Mexico has put their factories at risk.

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