SEMA eNews Vol. 22, No. 21, May 23, 2019

Tariffs on Canadian and Mexican Metals Removed

By SEMA Washington, D.C., Staff

The United States has reached agreement with Canada and Mexico to exempt those countries from tariffs being imposed on imports of steel and aluminum as of May 20. The U.S. has imposed global tariffs on steel (25%) and aluminum (10%) under authority of Section 232 of U.S. trade law (national security). Most of the tariffs began on June 1, 2018. Only Argentina, Australia, Brazil and South Korea had trade agreements exempting them from the tariffs. The tariffs apply to processed raw materials (steel/aluminum plate, sheets, bars, etc.) but not finished products (e.g., wheels, exhausts, etc.).

In 2017–2018, the U.S. Department of Commerce (DOC) investigated whether potential U.S. dependence on foreign steel and aluminum posed a threat to national security. The DOC cited excess global production, which had reduced prices and resulted in the closure of many U.S. factories. At the time, U.S. steel mills were operating at 73% of capacity and more than half of U.S. aluminum capacity lied dormant, with imports accounting for 90% of U.S. aluminum consumption. Since the tariffs had been imposed, U.S. domestic steel production is now over the goal of 80% capacity although aluminum production still lags.

The agreement to exempt Canada and Mexico from the metal tariffs will boost prospects for ratification by the U.S. Congress of the U.S.-Mexico-Canada Agreement (USMCA), which will replace the NAFTA accord. Under the agreement, The U.S. may reimpose tariffs on steel or aluminum if there is a meaningful surge in imports.

For more information, contact Stuart Gosswein at stuartg@sema.org.

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