Organizations representing steel and aluminum manufacturers say the U.S. must do more to counter circumvention of U.S. trade laws. They aren’t the only industries feeling the pain, either.
Back in May, the Biden administration announced it planned to place new tariffs on a number of imported products from China, including in strategically important industries like steel, aluminum, electric vehicles, semiconductors, solar cells, batteries, and more.
As we noted at the time, this was certainly the right move to make. China’s government has spent decades utilizing a litany of unfair practices to dominate global industries and force competitors out of business. Tariffs serve to counter that malfeasance, working to prevent a flood of artificially cheap goods from flooding the U.S. market and driving American manufacturers out of business. Tariffs, for example, are the top reason why there hasn’t been a surge of cheap Chinese autos in the U.S. market (yet).
But China knows how to play the long game, and already is implementing a play to dodge U.S. tariffs and penetrate the U.S. market.
There’s a growing body of evidence that China is using third-party countries like Mexico and Vietnam to circumvent U.S. trade action. Mexico is now the top exporter of goods to the U.S., but a whole lot of those goods are either made by Chinese firms operating in Mexico or merely shipped in from China, with Mexico as the pathway to the U.S. market.
This trend has been particularly acute in the auto industry, CNN reported. But the steel and aluminum industries also have felt the impact of China’s circumvention, and are now calling on the U.S. Trade Representative (USTR) to take action against Mexico and other countries that enable these unfair trade practices.
In public comments submitted to the agency, American Iron and Steel Institute (AISI) President Kevin Dempsey writes that his organization, which is made up of steel manufacturers across the United States, favors the increased tariffs on Chinese steel announced by the Biden administration in May. But he cautions that as currently structured, the tariffs will only apply to a small portion of Chinese steel imports.
In order to maximize the effectiveness of this trade action — which is vitally important, given China’s massive overcapacity in steel — the tariffs should be modified to “apply to all steel products where the original raw steel was melted and poured in China, regardless of the country of final processing.”
Dempsey continues: “Such a revised rule of origin for the Section 301 tariffs on steel products will more accurately reflect the impact China is having on the global steel market and account for exports of Chinese steel to third countries that are subsequently exported to the United States after further processing.”
AISI isn’t alone in calling for trade action to counter Chinese circumvention of U.S. trade duties. The Aluminum Association put forth a similar suggestion in its comments to USTR, noting that tariffs on Chinese aluminum have helped stop the flood of unfairly traded goods into the U.S. market. In turn, that’s led to billions of dollars in U.S. investments in the aluminum industry, including $3 billion since early 2023.
But Chinese producers have used third-party countries like Mexico to dodge the duties that have allowed the U.S. industry to grow, the association warns.
“While Chinese producers and exporters of these products have reduced the volume of shipments to the United States, the volume of Chinese exports to third countries has grown substantially – as products that previously were exported to the United States have been diverted to other markets,” writes Will Brown, the association’s vice president for government relations and international programs.
It’s going to take some new strategies to counter China, Brown argues.
“Ambassador Tai has spoken often about the need for ‘new tools’ to ensure that free markets and an open trade regime are not exploited by those that would seek to take advantage of such circumstances,” Brown writes. “In that regard, we urge you and your colleagues to seriously consider the application of Section 301 tariffs to aluminum-intensive products imported into the United States from third countries that incorporate Chinese-origin aluminum. Although any such action would be new and novel, we urge such an action in order to address U.S. imports of aluminum-intensive products incorporating Chinese-origin aluminum or aluminum products that are detrimental to the domestic aluminum industry and economy.”