Steely relations

Latin American nations impose tariffs on Chinese steel.

Countries like Mexico, Chile and Brazil have imposed high tariffs on Chinese steel imports to protect their domestic steel industries from the influx of cheaper Chinese steel. These protectionist measures aim to curb market distortions caused by dumping – where Chinese producers sell steel at below-market prices.  

A consultant on international trade issues commented, “It should be noted that the context of these three countries is different, with Brazil and Mexico being generally more likely than Chile to use tariffs as a mechanism and it is not surprising that these two countries have implemented them vis-à-vis China.” He continued, “In the case of Chile (the country that most resisted implementing such tariffs) the Anti-Distortion Commission confirmed unfair competition before deciding to provisionally increase surcharges on Chinese steel.” 

On the other hand, a leader in the Mexican National Chamber of the Iron and Steel Industry highlighted that Mexico imposed the tariffs due to “American pressure in the first quarter of the year to increase tariffs on steel from our country because Mexico allegedly triangulates the purchase of steel from China, and “resells” it to the United States in violation of the TMEC.”  

Higher tariffs can help local steel producers by reducing unfair competition, potentially boosting local production and employment. For example, Brazil’s steel industry, one of the largest in Latin America, stands to benefit from reduced competition, enabling it to regain market share and stabilise prices. The international trade consultant stated, “There is consensus that dumping is real and generates problems for steel-producing companies. The consensus is that a certain level of special tariffs is justified.” 

“There is consensus that dumping is real and generates problems for steel-producing companies.”

Consultant on international trade issues

It is uncertain how China will respond, but it will likely strain relations between the countries since the measures can only be interpreted as a hostile act towards the world’s second-largest economy. The Mexican steel and iron industry leader affirmed, “Mexico is aligned with its partners in the United States and Canada, so if we must draw a line with China and there are arguments, there is no fear of taking precautionary action against China.”

The international trade consultant also underlined that “Chile’s relationship with China (its main trading partner) is going through a bad patch, and China has suspended relevant investment projects in Chile, citing problems of lack of security and delays in the approval of permits.” Despite this, China maintains active ties with all three countries – with Brazil, it is a member of BRICS, with Chile it is heavily invested in its mining sector and it was the second largest FDI investor in Mexico in 2023.

Previously, China has been known to retaliate; in 2018, when the US imposed tariffs on Chinese metals, it imposed tariffs on American agriculture. “In general, China’s retaliation is unlikely to be drastic in response to the tariff increase, although there will undoubtedly be at least some gestures of displeasure on its part.” The trade consultant expanded, “China is likely to be less enthusiastic and tolerant in other aspects of its trade relationship.” 

In Mexico and Brazil, there appears to be no desire to make an enemy of China; rather, these measures appear industry-specific. Both countries seem satisfied with maintaining geopolitical neutrality and balancing their trade relations between the two global powers. Unlike the US tariffs on China, which were part of an active trade war and broader competition, these tariffs are specifically targeted at the steel industry.  

Despite this, the Mexican iron and steel leader acknowledged that while “the relationship is good, it has had its strained moments. On the other hand, the United States has sought in various ways to put pressure on Mexico to prevent Chinese commercial progress and, as our main partner, it is in our best interest to help the United States protect our shared interests.”   

“the United States has sought in various ways to put pressure on Mexico to prevent Chinese commercial progress.” 

Leader in the National Chamber of the Iron and Steel Industry, Mexico.

Although Mexico has discussed imposing tariffs on Chinese aluminium, the focus remains industry-specific, suggesting it is unlikely to escalate into a full-scale trade war. Indeed, the trade consultant confided, “In general, states will seek to limit these measures to the most critical industrial inputs, but it remains to be seen how well they will be able to withstand future pressures from sectors of the local economy.” It is steely clear that no one will stand to gain if this dispute flares up and spreads further. 

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