Canada and Mexico May Be Big Winners From Steel Tariffs - Global Trade Magazine
  April 10th, 2018 | Written by

Canada and Mexico May Be Big Winners From Steel Tariffs

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Sharelines

  • Canada and Mexico are set to win big again from US steel tariffs.
  • The president is using exemptions to steel tariffs as leverage in NAFTA reform negotiations.
  • The NAFTA-partner advantage on steel tariffs may not last.

As the Trump Administration slapped 25-percent tariffs on imported steel, two countries are set to be big winners.

Back in 2002, President George W. Bush imposed 30-percent import tariffs on most steel products, exempting Canada and Mexico. While also exempting some developing countries with small market shares, this move stymied most of Canada and Mexico’s non-US competition. The result, as our main graphic above shows, was a huge boost to their share of US steel imports, from 24 percent to 35 percent. Moreover, after the Bush administration repealed tariffs at the end of 2003, Canada and Mexico sustained the larger share of the US market they had taken over the previous twenty-two months—as we show in the small inset graphic. The Bush “tariffs . . . saved the Mexican steel industry,” according to the CEO of steelmaking equipment manufacturer Magneco/Metrel, who testified at a 2002 House hearing.

Now, Canada and Mexico are set to win big again. Canada is currently America’s number one foreign supplier of steel, at 16.7 percent of total imports; Mexico is number four, at 9.4 percent. As the experience of the Bush tariffs shows, some of the boost in US market share the two can anticipate should, given the stickiness of supply chains through time, endure beyond the eventual elimination of the Trump tariffs.

The president is using the exemptions as leverage in NAFTA reform negotiations, so it remains to be seen how long the NAFTA-partner advantage will last. But for now, when it comes to steel, at least, Trump is set to Make NAFTA Great Again.