Primarily as a result of the arrival of large volumes of cheaply priced product from China, economic officials have moved to tax Mexican steel imports.
Earlier this week, the nation’s undersecretary for industry and commerce, Rogelio Garza Garza, announced that the country’s Economics Ministry had come to a decision to impose a 15% tariff on Mexican steel imports. The implementation of the levy will apply to five classes of steel products that include:
- steel ingots
- plate steel
- cold and warm rolled steel
- steel bars
Tariffs will go into effect shortly, after formal notification of the action is printed in the nation’s Diario Oficial, or its Official Journal. The duration for which the tariff will be imposed will be for a period of six months.
The government’s decision to impose a tariff on Mexican steel imports, stems mainly as a response to protect domestic manufacturers from a glut of the commodity that has flooded international markets. Excess global supply is mainly attributable to the slowdown of the domestic Chinese economy. Steel producers in that country have pushed more of their product on to international markets as internal demand has softened in recent times.
As a result of the flooding of the Mexican market with cheap Asian imports, industry trade organizations that include the Sindicato Nacional de Trabajadores Mineros, Metalúrgicos, Siderúrgicos y Similares and the Camara Nacional de Acero (Canacero) have been lobbying for the government to this type of action against Mexican steel imports. As a result of global market conditions, Mexican steel producers such as DeAcero, Arcelor Mittal Mexico and Altos Hornos de Mexico (AHMSA) have been forced to lay off significant numbers of employees. In addition to employee cuts, cheap Mexican
steel imports have resulted in the cancellation and delay of new capital investment in the domestic steel manufacturing sector.
While Mexican steel production trade associations vociferously called for the imposition of new tariffs on Mexican steel imports, other organizations, principally the Mexican Automotive Industry Association (AMIA) protested that the imposition of new taxes on imports would have a deleterious effect on the end pricing of their passenger vehicles, and, thus, put the sale of Mexican manufactured automobiles at a global economic disadvantage. Driven mainly by consumption by the nation’s burgeoning automotive industry’s demand, Mexican steel imports from China grew from six to ten percent during the period of 2010 – 2014. Other industries that voiced protest against the imposition of further tariffs on Mexican steel imports included those whose manufacturers are
involved in the production of home appliances and “white goods.”
In addition to tariffs, the Ministry of Economics has established preliminary quotas on Mexican steel imports that originate in China, as well as additional controls on product manufactured in Germany, France, Spain and India. The 15% tariff that will be applied to Chinese steel for a period of six months after formal announcement is made in the Diario Oficial will also be levied on slabs, plates, rolled steel and bars imported from all other non-NAFTA countries.