A bipartisan group of senators is urging President Biden to reinstate tariffs on Mexican steel to prevent China from gaining backdoor access to the U.S. market.
In a letter led by Sen. Marco Rubio (R-Fla.), the lawmakers urge President Biden to impose a 25% tariff on all steel imports from Mexico after a 2019 deal significantly reduced tariffs but left open the option to reimpose them if either country's production surges.
“Imports of Mexican steel are currently surging well beyond historical trade levels. Imports of Mexican steel conduit have soared approximately 500% from their 2015-2017 baseline and could rise as much as 700% this year,” the lawmakers wrote.
“That means we have an obligation to put barriers back in place to stop the surge and protect steelworkers.”
That's what the lawmakers wrote, including other Sens. Sherrod Brown (D-Ohio), Mike Braun (R-Ind.) and Bob Casey (D-Pennsylvania).
“That means we have an obligation to put barriers back in place to stop the surge and protect steelworkers.”
Broad-based tariffs on Mexican steel and aluminum were imposed in 2018 by former President Trump, but the U.S. signed a separate agreement in 2019 to reduce the tariffs in the United States-Mexico-Canada Agreement (USMCA).
In July, President Biden imposed a 25% tariff on Mexican steel that was melted or cast outside of Mexico before being processed into a finished product. At the time, the White House estimated that about 13% of Mexican steel products imported into the United States were cast or melted in other countries.
It also imposed a 10% tariff on aluminum refined or cast in China, Belarus, Iran and Russia.
The tariffs are part of an ongoing effort to stop Asian power China from evading tariffs imposed to prevent it from flooding the U.S. market.
But Chinese investment in Mexico is surging as part of a broader effort to leverage nearshoring, particularly through electric vehicles.
“While bringing manufacturing back to the United States is desirable and policymakers should prioritize it, it is also a welcome trend to see Western companies bringing manufacturing back to the Western Hemisphere. Yet Chinese companies are capitalizing on this 'nearshoring' trend to avoid paying tariffs on goods they export to the U.S. market. Unfortunately, Chinese companies are capitalizing on this nearshoring trend to avoid paying tariffs on goods they export to the U.S. market,” Rubio wrote.
Technically, foreign-owned companies in Mexico can produce products that comply with USMCA rules, but lawmakers said Chinese nearshoring is aimed at sending raw materials from China that are not covered by USMCA directly into Mexico through investments.
“Chinese factories in Mexico are not only owned by China; China is also building up transportation capacity between China and Mexico so those factories can use Chinese-made raw materials,” the senators wrote.
Under the 2019 agreement, Mexico agreed not to reimpose retaliatory tariffs on products other than aluminum and steel if the United States invoked a production increase clause.
Following former President Trump's 2018 announcement, Mexico imposed retaliatory tariffs on $3 billion in U.S. exports, targeting products produced in key Republican congressional districts and states.
If Biden were to impose tariffs under the 2019 agreement, Mexico would be at a disadvantage because it would be limited in its ability to impose retaliatory tariffs on other sectors, such as agriculture.
The Senate letter came just weeks before Mexico's President-elect, Claudia Scheinbaum, is set to be sworn in as president on Oct. 1 to succeed President Andrés Manuel López Obrador.
Upon leaving office, President Lopez Obrador implemented major reforms to the judiciary, replacing merit-based appointments with direct election of judges, an effort that many fear will disrupt foreign investment.
The USMCA is also due to be reviewed in 2026, an uncertain process that could result in anything from tweaks to threats of withdrawal.
“The Administration has a wide range of issues to address to strengthen our relationship and investor confidence with the Mexican government, including an independent judiciary, a stronger national security policy, and orderly immigration. But because our free trade agreement with the world's largest economy is a privilege up for reevaluation in 2026, we must also focus on these two trade issues,” the lawmakers wrote.
“All the while, we must work with the Mexican government to ensure that our trade relationship is built not just on geographic proximity but on our shared goal of protecting North American manufacturing jobs from the Chinese Communist Party.”
“There are many issues on which your Administration must work with the Mexican government to strengthen our bilateral relationship and increase investor confidence, including judicial independence, stronger national security policies, and immigration enforcement. But we must also focus on these two trade issues, as our free trade agreement with the world's largest economy is a privilege up for reevaluation in 2026,” the lawmakers wrote.
“All the while, we must work with the Mexican government to ensure that our trade relationship is built not just on geographic proximity but on our shared goal of protecting North American manufacturing jobs from the Chinese Communist Party.”
—Updated 12:01 p.m.
