New US Tariffs to Stop China’s Evasion

Employees working on aluminum products at a factory in Huaibei, in China's eastern Anhui Province, on Jan. 31, 2023. (STR/AFP via Getty Images)

Commentary

The Biden administration is imposing increased tariffs on steel and aluminum that China is routing through Mexico, White House officials said on July 10. The much-needed tariffs apply with immediate effect. The administration justified the new tariffs by referring to documented evidence of China’s tariff evasion.

There is particular concern that steel meant for China’s building industry is being transshipped through Mexico at dirt-cheap prices because of China’s real estate crisis. National economic adviser Lael Brainard told reporters that tariffs of 25 percent would apply to Mexican steel poured or melted outside of North America. That steel used to enter the United States tax-free. Ten percent tariffs will also apply to aluminum from Mexico that had been cast or smelted in China, Russia, Iran, or Belarus, Ms. Brainard said.

“Chinese steel and aluminum entering the U.S. market through Mexico evades tariffs, undermines our investments, and harms American workers in states like Pennsylvania and Ohio,” she said. “When China’s export surges harm our markets, whether directly or via other countries, we will act.”

The new tariffs add to former President Donald Trump’s tariffs of 2018. They will require new country-of-origin reporting by Mexico and apply to large amounts of metals being transshipped by China. U.S. steel imports from Mexico rose to approximately 4 million tons in 2023, about 13 percent of which was poured or melted outside North America. Aluminum imports from Mexico increased to as much as 710,000 metric tons in 2023, 6 percent of which was cast or smelted elsewhere.

Steel exported from China is unnaturally cheap due to large state subsidies that drive out competitors. Fewer U.S. steel and aluminum factories make the United States vulnerable in emergencies, such as war, and subject to higher prices if the Chinese Communist Party (CCP) suddenly decides to decrease supply to the United States or tries to impose monopolistic pricing.

Increased tariffs may increase prices for domestic producers and consumers, but they will also increase U.S. government revenue, which can decrease U.S. income taxes or pay down the national debt. They will help the U.S. steel and aluminum industries keep their factories running, increase jobs, and build the U.S. industrial ecosystem. That would be critical in case of some emergencies in which the United States relies more heavily on what we can produce at home, not what could be sunk in transit from China or otherwise denied to U.S. markets. If the United States and China go to war over Taiwan, for example, will the CCP allow Chinese steel to be shipped to the United States? Don’t bet your life on it.

The Alliance for American Manufacturing issued a statement in which its president, Scott Paul, called the new tariffs a “step forward in countering China’s predatory trade practices and making North American steel trade more fair.” He said, “China and other nations must not be allowed to exploit trade with our neighbors in order to avoid US trade enforcement.”

The Coalition for a Prosperous America (CPA), which represents some U.S. manufacturers affected by Mexican steel imports, took issue with those imports unaffected by the new tariffs. On July 10, the CPA underlined that the tariffs should be extended to “conduit, rebar, and wire rod, as well as other steel products that Mexican companies have increasingly shipped tariff-free into the U.S. market at levels far above what they agreed to.”

The CPA argues that Mexico is in “ongoing and blatant violation of the 2019 joint steel agreement” in which “the U.S. agreed to drop Section 232 tariffs, and Mexico agreed to restrain steel export volume to 2015-17 levels.”

That said, the tariffs are a step in the right direction. They only apply to Mexican metals that are partly made in China. Still, at least this establishes the principle, for perhaps the first time, that tariffs against an adversary should apply to products that it attempts to transship through third countries. Now that such a tariff has been imposed at least once, it will be easier for the United States to include clauses in future tariffs to apply to any company from any adversary country, regardless of its location.

Given that the CCP is anti-United States and can order any of China’s companies anywhere in the world to halt exports to countries it dislikes, it is unwise to rely on these companies in case of emergency. Tariffs on them will encourage safer imports from friendly countries, protect and grow U.S. supply chains, and produce more good jobs.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.