With the contentious mid-term elections finally over, the Biden administration and Congress will face a number of challenges in the coming year. And while voters remain concerned about China’s continuing rise, there are a number of less prominent—but equally vexing—trade issues that must be confronted. High on the list is Mexico’s continued dumping of steel products in the United States. It’s a clear breach of recent negotiations between the two countries. In response, the Biden administration should reimpose steel tariffs, to dissuade Mexican companies from further violating Mexico’s agreements with the United States.
In 2018, the Trump administration imposed Section 232 tariffs on steel imports to the U.S. This was done in the face of global overproduction that threatened the future viability of America’s steelmaking industry.
Both Canada and Mexico vigorously protested the tariffs—and responded with counter-tariffs. In May 2019, the Trump administration reached a deal with both countries to control the volume of steel imports. Certain amounts of steel products could enter the U.S. duty-free. But if steel imports surged beyond these limits, the U.S. could resume tariffs.
This was a good deal for Mexico. But it’s now clear that Mexico has broken its promise—and made no attempt to actually rein in steel exports to the U.S. Federal data paints a particularly grim picture, since Mexico’s steel exports are currently soaring to record levels. In fact, the U.S. Census Bureau’s August report on steel imports noted that the “largest country increases occurred with Mexico.”
Instead of honoring its commitment to limit steel shipments to the U.S., Mexico has actually—and flagrantly—ramped up its steel exports. A look at federal data shows a remarkable 577% increase in imports for 2022, compared to the pre-tariff period of 2015 to 2017.
This is similar to China’s brazen violations of the “Phase One” agreement negotiated by the Trump administration in 2020. In exchange for reduced U.S. tariffs, China pledged to purchase more U.S. agricultural and manufacturing goods. But Beijing reneged—and met only 63% of its commitment.
Mexico appears to be following Beijing’s example—that it can breach its commitments to the U.S. without consequence. Mexican steel companies are steadily dumping tubular steel in the U.S.—especially the types of steel products used for electrical conduits and construction. What makes this particularly disturbing is that the demand for tubular steel in the U.S. has actually been going down. Steel use in the U.S. has been relatively stable of late, but is now declining due to the Federal Reserve’s recent rate hikes.
Despite this, Mexican conduit steel exports to the U.S. keep climbing. They reached roughly 52,000 short tons in 2020. By 2021, they had climbed to around 62,000 short tons. For 2022, they’re projected to reach nearly 70,000 short tons.
In order to circumvent Mexico’s pledged limits, some steel producers in Mexico have reclassified their steel exports as “electrical metal tubing” (EMT). Thankfully, U.S. Customs & Border Protection has now shut down this misclassification—but only after two years’ worth of export surges.
Making all of this worse is that Mexico is currently suing the United States under the U.S.-Mexico-Canada Agreement (USMCA) to allow more overseas content in the vehicles it assembles and ships duty-free to America.
When the Trump administration first imposed tariffs on steel in 2018, it was for national security reasons. The United States needs a competitive, high-tech domestic steel industry to ensure self-reliance in an adversarial world. But Mexico has broken its promise—and U.S. workers are now paying the cost. Wheatland Tube, a steel conduit manufacturer, is closing its Long Beach, California factory and laying off 145 workers. The company cited surging Mexican steel imports as the reason for the plant closure.
The Biden administration must stand up for America’s steelmakers. And it shouldn’t let other countries openly flout the terms of agreements they’ve negotiated with Washington. Unless Mexico immediately adheres to its 2019 steel obligations, President Biden should reimpose Section 232 tariffs on Mexican steel.
Michael Stumo is CEO of the Coalition for a Prosperous America.Twitter: @michael_stumo.