Section 232 update increases US trade defence measures

Mexican steel imports into the United States will now be subject to 25% Section 232 tariffs unless proof is provided that the products were melted and poured in North America.

A White House statement said that the tariff’s new application, announced on July 10, will eliminate the transshipment of material to the US, via Mexico, from countries without an exemption to the trade defence regulation. It will also discourage “excess steel capacity and production”, it said. 

This could exert upward pressure to US steel prices as demand recovers. However, MEPS respondents do not expect steel supply or prices to be significantly affected in the near term. The White House estimates that just 13% of US steel imports from Mexico are melted and poured outside North America. 

Furthermore, some Brazilian steel could also be exempt from the new melt and pour rules. On July 11, the Mexican government stated that an agreement had been reached with the US to “design a mechanism ensuring that Brazilian steel processed in Mexico will not be subject to tariffs”. There is no detail on a timeline for this process. 

• This content first appeared in the July edition of MEPS's International Steel Review. The monthly report features steel prices, price indices, market commentaries and forecasts from across the region. Contact MEPS for details of how to subscribe.

Tightening of US trade defence rules 

This month’s announcement marks a further escalation of US measures to protect domestic steel producers from the effect of imports. It came two months after President Joe Biden proposed new Section 301 tariffs on USD18 billion of Chinese imports into the US. If imposed, they will introduce further tariffs of up to 25% on imported steel from August 1. 

A bill that may lay the foundations for future emissions-based tariffs on US steel imports was also introduced into the US House of Representatives in July. The proposed Providing Reliable, Objective, Verifiable Emissions Intensity and Transparency (PROVE IT) Act authorises a US Department of Energy study to compare the greenhouse gas emissions intensity of certain domestically produced goods, including steel, to those of goods produced in other countries. 

The “Prove It” bill’s wording alludes to its role as a further trade defence against China’s growing steel exports. It alleges that China has leveraged “lax environmental performance and enforcement to create a competitive advantage in international trade”. However, no specific reference to Chinese imports was made as President Biden announced the tightening of Section 232 rules. 

Mitigating oversupply 

During MEPS’s July research period, respondents revealed that oversupply remains an issue in a US market where steel prices remain in decline amid subdued demand. A utilisation rate below 80% for the US’s domestic mills and a significant increase in Mexican imports were cited as the primary reasons for the changes to Section 232 tariffs. 

The US imported almost 3.8 million tonnes of steel from Mexico in 2023, making it the second largest import origin after Canada and accounting for 15% of all US steel imports. The volume of Mexican steel imports into the US had reached more than 4.8 million in 2022. In 2023, slabs accounted for the largest proportion of imports from Mexico, followed by galvanised and other metallic coated steel. 

Mexico’s 2023 imports surge 

Mexico imported almost 17.5 million tonnes of steel in 2023, a 61% increase on 2022. Imports from China and Japan drove the increase with volumes up by 61% and 41%, respectively. However, the biggest rise came from “countries not specified”, which rose by 150% year-on-year to over six million tonnes. 

In August last year, Mexico imposed tariffs of 25-35% on steel products from countries without a preferential or free trade agreement. Subsequently, Mexican imports declined by 12% in the first five months of 2024. 

MEPS’s North American respondents say that the new melt and pour rules for steel imports from Mexico is unlikely to have a significant effect on US steel supply. Nonetheless, some suggest that it could improve buyer confidence in material from the country. It also could widen the gap between the price of steel in Mexico and that destined for export to the US.