MEPS: US tariff threats could disrupt steel sector and global trade

Shortly after being sworn in as the 47th President of the United States, President Donald Trump announced plans to impose significant tariffs on key trading partners. On January 20, Trump proposed a 25% tariff on all US imports from Mexico and Canada, set to take effect on February 1. Additionally, he suggested a 10% tariff on imports from China, citing concerns over illegal immigration and the flow of fentanyl as primary justifications.

An analysis, published by MEPS in its International Steel Review, highlights that, if implemented, these tariffs could have severe near-term consequences for the US steel industry and the broader economy. China, Mexico, and Canada are the United States' largest trading partners, accounting for a significant share of both imports and exports. While Chinese imports are already subject to tariffs under Section 232 and 301 legislations, trade with Mexico and Canada is governed by the United States-Mexico-Canada Agreement (USMCA), which eliminates tariffs on most goods crossing North American borders. A 25% tariff on these imports could violate the USMCA and disrupt North American supply chains.

Despite the announcement, considerable uncertainty remains about whether these tariffs will be implemented on February 1 as planned. President Trump did not impose tariffs on Mexico, Canada, or China on his first day in office as previously promised during his campaign. Instead, he signed an "America First Trade Policy" memorandum, directing federal agencies to review and make recommendations by April 1. Even if the tariffs do not take effect immediately, businesses are advised to prepare for potential price increases and higher tariffs in the near future.

Both Mexico and Canada, whose economies heavily rely on trade with the US, have indicated that they would respond with reciprocal tariffs. Canadian Prime Minister Justin Trudeau has expressed support for matching tariffs, while Mexican President Claudia Sheinbaum emphasized cooperation on critical issues like immigration.

The analysis further notes that broader tariff actions could be pursued in 2025 following the April trade policy review. This includes the possibility of antidumping and countervailing duties on the top 10 importers of corrosion-resistant (CORE) steel, which could impact steel imports from mid-2025.

Other countries, including the European Commission, are also exploring trade defense measures. The European Commission is reviewing its quota-based import safeguard system for steel and considering increased tariffs on imports exceeding quotas, with a decision expected by the end of March.

Source: MEPS, Photo: Fotolia