A bipartisan group of senators is calling on President Biden to reinstate duties on Mexican steel to guard against Chinese backdoor access to the U.S. market.
In a letter led by Sen. Marco Rubio (R-Fla.), the lawmakers ask Biden to set a 25 percent tariff on all Mexican steel imports, following a 2019 agreement that slashed those tariffs but left the option open to reimpose them if one country’s production surged.
“Imports of Mexican steel are now surging far in excess of historical levels of trade. Imports of Mexican steel conduit have soared to around 500 percent over the 2015-2017 baseline and may rise to 700 percent this year. That means that we are obliged to reimpose barriers to stop the surge and protect our steelworkers,” wrote the lawmakers, who also included Sens. Sherrod Brown (D-Ohio), Mike Braun (R-Ind.) and Bob Casey (D-Penn.).
“That means that we are obliged to reimpose barriers to stop the surge and protect our steelworkers.”
The broad tariffs on Mexican steel and aluminum were imposed by former President Trump in 2018; the United States signed separate agreements with its United States-Mexico-Canada Agreement (USMCA) cutting the tariffs in 2019.
Biden in July slapped a 25 percent on Mexican steel melted or poured outside the country before being manufactured into a final product. At the time, the White House estimated about 13 percent of Mexican steel products imported to the United States were poured or melted elsewhere.
He also implemented a 10 percent tariff on aluminum smelted or cast in China, Belarus, Iran or Russia.
Those tariffs are part of an ongoing effort to prevent China from circumventing duties imposed to prevent the Asian giant from flooding the U.S. market.
But Chinese investment in Mexico is surging as part of a broader effort to capitalize on nearshoring, particularly through electric autos.
“While bringing manufacturing back to the U.S. is preferred, and policymakers should prioritize that, it is also a welcomed trend when Western companies bring manufacturing back to the Western Hemisphere writ large. However, Chinese firms are exploiting this ‘nearshoring’ trend in order to avoid paying tariffs on goods they export to the U.S. market Unfortunately, Chinese firms are exploiting this nearshoring trend to avoid paying tariffs on goods they export to the U.S. market,” wrote Rubio.
Technically, foreign-owned companies in Mexico would be able to produce goods that comply with USMCA rules, but the lawmakers said Chinese nearshoring is directly aiming to funnel Chinese inputs through their Mexican investments.
“Chinese factories in Mexico are not only Chinese in ownership. China is also adding shipping capacity between China and Mexico so that these factories use inputs made in China China is also adding shipping capacity between China and Mexico so that these factories use inputs made in China,” the senators wrote.
Under the 2019 agreement, Mexico agreed not to reimpose retaliatory tariffs on products other than aluminum and steel if the United States activated the surge clause.
Following former President Trump’s 2018 announcement, Mexico slapped retaliatory tariffs on $3 billion of U.S. exports, targeting products made in key GOP lawmakers’ districts and states.
If Biden were to impose tariffs based on the 2019 agreement, Mexico would be at a disadvantage, limited from enacting retaliatory tariffs on other sectors such as agriculture.
The Senate letter comes just weeks before Mexican President-elect Claudia Sheinbaum is sworn in on Oct. 1, replacing President Andrés Manuel López Obrador.
López Obrador enacted a massive judiciary overhaul on his way out the door, replacing judiciary merit-based appointments with direct popular election of judges, an experiment that many worry will disrupt foreign investments.
And the USMCA is due for a review in 2026, an uncertain process that could elicit anything from minor tweaks to threats of withdrawal.
“There are various issues on which your administration must work on with the Mexican government to strengthen our relationship and investor confidence — such as the independence of its judiciary, a more robust security policy, and orderly migration. But, we must also focus on these two trade issues because a free trade agreement with the world’s largest economy is a privilege that will be reevaluated in 2026,” wrote the lawmakers.
“All the while, we must work with the Mexican government to ensure that our trading partnership is built not just on geographic proximity, but also on a shared goal of defending North American manufacturing jobs from the Chinese Communist Party.”
There are various issues on which your administration must work with the Mexican government to strengthen our relationship and bolster investor confidence—such as the independence of its judiciary, a more robust security policy, and the enforcement of immigration laws. But we must also focus on these two trade issues because a free trade agreement with the world’s largest economy is a privilege that will be reevaluated in 2026,” wrote the lawmakers.
“All the while, we must work with the Mexican government to ensure that our trading partnership is built not just on geographic proximity, but also on a shared goal of defending North American manufacturing jobs from the Chinese Communist Party.”
