Biden taxes foreign-made steel and aluminium imports routed through Mexico to check China


The United States government under Joe Biden will be imposing tariffs on steel and aluminium imported from Mexico but made in a different region in what appears to be a bid to check China from routing its goods through the country to enter USA. 

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Steel not melted or poured in Mexico will attract a 25% tariff and 10% tariff will be imposed on imported aluminium. 

Lael Brainard, director of the White House National Economic Council on Wednesday said the tariffs will be levied as part of an agreement with Mexico through section 232 of the Trade Expansion Act which deals with imports that could threaten US national security, AP said. 

Economic move or political?

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The US government had in May increased tariffs on certain steel and aluminium products under section 301 of the Trade Act of 1974 from 0-7.5% to 25%. With the move coming ahead of the US elections in November, the increase in tariffs was seen to be more of a political move rather than an economically driven one. 

Wednesday’s move was also seen to be suggestive of carrying political messaging with Brainard also stating that Trump could have taken similar actions but failed to do so. 

Impact of the tariffs

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According to AP, administration officials said the U.S. imported 3.8 million tonnes of steel last year from Mexico, with 13% of that having been poured or melted outside that country. Similarly, the US imported 105,000 metric tonnes of aluminium from Mexico and only 6% was smelted or cast outside that country.

This makes the financial impact of the tariffs minimal. 

Divided by ideology, united by tariffs against China 

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Even with ideological differences, if there is one area where both the Trump administration and the Biden administration have acted similarly, it is in their approach to dealing with increasing Chinese exports by slapping tariffs. 

Biden had largely retained the tariffs imposed by his predecessor against China. 

This is because the issue has a direct bearing on the American working class- a large voting bloc.

How will results impact trade policy concerning China?

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Analysts are largely of the view that irrespective of who wins, the US government’s stance towards China is unlikely to change, although Trump is expected to be more aggressive. 

“Mr Biden and Mr Trump have both tried to subsidise US industry by increasing trade barriers, particularly against China. More of the same may follow, although Mr Trump’s “America First” approach appears comparably tougher, including a 10% blanket levy on all US imports plus a 60% tax on Chinese products. If implemented, this could create headwinds for foreign equities, in addition to a US inflationary impulse that could initially send US Treasury yields higher,” investment management firm Allianz Global Investors said earlier this month. 

“Regardless of who wins the US presidential election, the government is likely to continue adopting a more protectionist stance on trade policy. A second term for Trump may bring an escalation in trade tensions that would likely deliver another stagflationary shock to major world economies…,” Calvin Tse, head of Americas macro strategy at BNP Paribas, said last month. 

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