by MICHAEL STUMO
In 2019, Mexico and the United States signed an agreement to limit surging Mexican steel exports. At the time, the U.S. Trade Representative believed the agreement would “protect America’s steel and aluminum industries.”
However, it’s now clear that Mexico has continually violated the agreement – and is not honoring its commitments.
The 2019 steel agreement contained a critical requirement. Both countries pledged to prevent the importation of steel “that is unfairly subsidized and/or sold at dumped prices.”
At the time, the U.S. agreed to lift its steel tariffs if Mexico would refrain from exporting deliberately underpriced steel and suppressing its export data. Both countries also promised to establish monitoring systems to ensure that steel surges did not occur, and that the volume of steel trade would be consistent with baseline levels.
Unfortunately, Mexico didn’t follow its obligations.
Industry data from U.S. domestic steel manufacturers show that Mexican steel producers are now deliberately pricing their steel 25% lower than U.S. competitors. And at the same time, the Mexican government continues to suppress data on imports of steel to Mexico, raising the possibility of circumvention of steel products shipped to the U.S.
All of this not only violates the 2019 steel agreement, but also threatens the viability of America’s steel industry.
Mexico is now exporting steel products to the U.S. at levels surging well beyond historic baselines. Duty-free steel imports from Mexico have risen 141% over historic levels, with some subcategories of imports tripling and quadrupling. This includes a 577% increase in steel conduit imports for 2022, compared to the baseline period of 2015 to 2017.
Steel is a key strategic industry, and it pays excellent wages for workers without a college degree.
However, in the past decade, America’s steel industry has struggled against deliberately underpriced imports from China and other countries. And now, Mexico is brazenly increasing its steel exports to the U.S.
A survey of the pricing for 36 different types of steel conduit products shows that Mexico’s exports are running between 21% and 25% lower than U.S. prices. Even more disturbing is that Mexico’s prices for 10 different types of electrical metal tubing (EMT) are all precisely 25% lower than U.S. prices.
This is part of a deliberate underpricing scheme by Mexico’s Obrador government to get more Mexican steel mills working. Mexico is breaching its commitments in the belief that the U.S. will do nothing.
An American steel conduit manufacturer, Wheatland Tube, has already closed its Long Beach, California, factory and laid off 145 workers due to these surging Mexican steel imports. Other U.S. plants could be next.
A bipartisan group of senators recently urged U.S. Trade Representative Katherine Tai to take action, explaining that the volume of annual iron and steel imports from Mexico has increased 73% since the past steel surge in 2015-2017.
Imports of semi-finished steel and steel products from Mexico are up an even greater 120%.
Steel conduits are an important industry, and Mexico recognizes the profitability. But considering that there is essentially no difference in transportation costs between the two neighboring countries, it’s obvious that Mexico has an agenda: Find the U.S. price, and undercut it as much as possible.
There’s no justification for such a predatory assault on U.S. industry – and in clear violation of the agreement signed by the two countries.
The Biden administration must stand up for America’s steelmakers. Unless Mexico immediately adheres to its 2019 steel obligations, the U.S. should reimpose Section 232 tariffs on Mexican steel imports.