29 Oct

Could the Section 232 Tariffs Threaten the USMCA?

WRITTEN BY Mohit Oberoi, CFA

Section 232 tariffs

The Trump administration recently renegotiated NAFTA, which is now called the United States–Mexico–Canada Agreement (or USMCA). However, the Section 232 steel and aluminum tariffs remain in place for Canada and Mexico despite this change.

Although the Trump administration had previously linked the lifting of the Section 232 tariffs to the NAFTA renegotiation, Canada and Mexico had sought to delink the two events. However, as the three countries have agreed on the new contract, Canada and Mexico are also seeking exemptions from the Section 232 tariffs.

Could the Section 232 Tariffs Threaten the USMCA?

Is a review in the cards?

According to Juan Carlos Baker, Mexico’s deputy economy minister for trade, “Certainly we expect the 232 issue to be taken care of before the signing.” The report adds that according to Kelly Craft, the US ambassador to Canada, President Trump is “reviewing” the Section 232 tariffs.

The Trump administration is looking to impose quotas that are below the current level of exports for granting Section 232 exemptions. If Canada and Mexico are granted export quotas above their current steel and aluminum exports, this could subdue the impact of the Section 232 tariffs, as higher US steel prices would attract more imports.

US steel imports from Canada and Mexico have risen this year despite the tariffs. US steel and iron ore companies (DIA) U.S. Steel Corporation (X), AK Steel (AKS), and Cleveland-Cliffs (CLF) have long criticized steel imports.

Exemptions

Canada seems to be preparing for a possible exemption from the US steel tariffs. The country has imposed safeguard duties on steel imports that could help allay concerns over the country being used as a transshipment hub for steel exports to the United States.

Other countries have also taken measures to protect their domestic steel industries from import deflection. Please read Trump’s Tariffs Are Leading to Protectionism Globally for more information.

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