Biden has just tried to shoot a round across the bow of China with his latest policy.
Tightening the Screws
The Biden administration is tightening the screws on steel and aluminum imports from Mexico in a bid to stop the flow of cheaper, state-subsidized Chinese metals entering the U.S. market. There is a twist, as the focus is on metals that were initially made outside of North America.
Plugging the Loophole
Companies have been using loopholes to obtain cheap Chinese metal that’s slipping through the cracks and into the U.S. market. Chinese materials have extra tariffs on them, but by shipping through Mexico, China has been able to skirt any extra fees – a loophole that lawmakers have been begging Biden to shut for months.
National Security in the Spotlight
Lael Brainard, director of the White House National Economic Council, stated that these tariffs fall under “section 232 of the Trade Expansion Act,” which focuses on imports that could threaten national security.
Breaking Down Biden’s New Policy
So, what’s the deal? The U.S. will now hit Mexican steel with a 25% tariff if it is melted or poured outside of North America. That steel used to come in duty-free, so this will hit a lot of people hard.
Global Metal Maneuvering
Mexican aluminum using metal from China, Belarus, Iran, or Russia will also be hit with a 10% tariff. This is partly in response to Mexico, which recently increased tariffs on steel and aluminum from certain countries.
Shedding Light on Metal Sources
This forced importers to get more transparent about their sources, and the Biden administration is hoping the same will happen here.
American Jobs First
According to the Biden administration, this isn’t just about numbers – it’s about American jobs.
Protecting Homegrown Industries
They’ve stated that these measures will protect American steel and aluminum factories, which have recently benefited from big government investments.
White House Speaks
“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,” Brainard stated.
Gloves Off
“When China’s export surges harm our markets, whether directly or via other countries, we will act.”
Political Jabs
This move also throws shade at former President Donald Trump. According to Brainard, Trump could have taken similar steps but didn’t. “The president is taking action to close loopholes left by his predecessor that allowed China to circumvent trade rules,” she noted.
Wooing Voters with Tough Trade Talk
With elections on the horizon, the administration is hoping that this will show voters that “Biden means business” when it comes to protecting American industry.
By the Numbers
Last year, the U.S. imported 3.8 million tons of steel from Mexico, with 13% of that having been produced outside Mexico. The U.S. also imported 105,000 metric tons of aluminum from Mexico, with 6% sourced from elsewhere.
Small Tariffs, Big Message
While the financial hit from these tariffs might not be huge given how small the volumes are, the political message is loud and clear: the U.S. is cracking down on China.
Mixed Reviews
Predictably, reactions have been mixed. Ohio Senator Sherrod Brown, a long-time critic of Mexican steel imports, is pleased. He’s constantly spoken about the threats imports pose to U.S. steelworkers (a talking point he has mentioned time and again as election season nears.) Brown stated, “We need to reinstate tariffs on Mexican steel until their imports are back to sustainable levels.”
Applause from Industry
Scott Paul, president of the Alliance for American Manufacturing, also applauded the decision. “This is the right call by the Biden administration,” he said. “China and other nations must not be allowed to exploit trade with our neighbors to avoid U.S. trade enforcement.”
The U.S.-Mexico Dialogue Continues
The Biden administration isn’t stopping here – officials are still talking with Mexico about other issues with steel imports. American steel companies and autoworkers have been critical of how these imports are threatening their livelihoods.
The Fight for Rust Belt Votes
Both Biden and Trump have tried to use the steel industry as a battleground to win over voters – especially in key states like Pennsylvania.
Trump’s Plan?
Trump, for his part, has proposed a 10% tariff on all imports if he’s elected – which would ramp up to a massive 60% on Chinese goods.
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The content of this article is for informational purposes only and does not constitute or replace professional financial advice.
