Are US steel tariffs for Mexico coming back now?
Are US steel tariffs for Mexico coming back now?

10 July 2023 – After a strong increase in steel and aluminium imports, the US government has voiced criticism towards Mexico and also brought up the possibility of reintroducing punitive tariffs. The US unemployment figures have fallen again. And the Chinese real estate market continues to develop positively.

Are steel tariffs for Mexico coming back now? 

In line with the 2019 agreement, the US emphasised the importance of Mexico closely monitoring the increase in steel and aluminium imports from Mexico to the US. In 2022, steel imports from Mexico increased by 72%. Reinforcing bar imports increased by a staggering 3,000% compared to the historical average of 2015 – 2017. Concerns have been raised that the Mexican steel industry is exploiting its status under the agreement by exporting steel from countries subject to US Section 232 tariffs. Moreover, aluminium imports from Mexico rise 86 per cent over 2022. 

Steel and aluminium tariffs could be reimposed 

Tariffs could be reimposed, leading to talks and possible retaliation if the surge in imports continues. As part of the US-Mexico agreement to remove the 25% steel and 10% aluminium tariffs, it was stated that the importing country could request consultations if imports “increase significantly above historical trade levels over a period of time”, taking into account market share.  

US unemployment rate continues to fall 

The US unemployment rate fell from 3.7% to 3.6% in June, demonstrating the resilience of the US economy.  At the next Federal Reserve meeting on 26 July, this is likely to cement the 0.25 percentage point interest rate hike. Raising rates is typically done to cool the economy to slow inflation, which is also typically done to reduce employment. The drop in the unemployment rate caused the yield on two-year US government bonds to fall from 5.01% to 4.86%, but by the close it had risen back to just under 5%. The US dollar also weakened slightly.  

It is likely that the Fed will wait for more data to be collected before making any further decisions on interest rate changes. The labour market is likely to expand in the coming weeks and months if rate hikes are paused in July. 

Chinese new home sales expected to be 8% higher y-o-y

New home sales for the year are on track to be 8% higher than last year, which is an indication of sustained demand despite the recent slowdown. Existing homes sold in the major metropolitan areas are expected to increase by a substantial 49% compared to the previous year. The market for existing residential properties has been more robust. As the Chinese economy continues to recover, this is reflected in the gradual brightening of the property market. This is indeed good news for the growing demand for raw materials in the domestic market. 

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