U.S. President Donald Trump on Feb. 9 announced he would impose tariffs of 25 percent on steel and aluminum imports, effective March 12. The United States’ top three suppliers of steel are Canada, Brazil and Mexico, and the vast majority of its aluminum imports come from Canada. How would these tariffs affect U.S. trade relations with major steel and aluminum exporters in Latin America? How likely are the tariffs to be implemented in March? How would the tariffs affect U.S. industries that rely heavily on steel and aluminum?
Nick Iacovella, head of public affairs and communications at the Coalition for a Prosperous America: “The Trump administration’s decision to impose tariffs on steel and aluminum imports is a necessary and long-overdue step to protect American manufacturers and workers from the devastating impact of surging imports. These tariffs will help restore stability to U.S. industry, safeguard domestic production and ensure that critical sectors are not harmed by a flood of artificially low-priced imports. The United States has long been a top market for steel and aluminum exporters like Canada, Brazil and Mexico, but these countries have taken advantage of America’s open market while failing to meet their trade commitments. In particular, Mexico has blatantly violated the 2019 Joint Steel and Aluminum Agreement, which was meant to cap its exports at historical levels in exchange for tariff-free access. Instead, Mexico’s steel shipments to the United States surged 472 percent above agreed-upon levels in 2023, with projections exceeding 700 percent in 2024. Canada, meanwhile, has flooded the United States with aluminum imports while failing to prevent China from using it as a backdoor to access the American market. President Trump’s action ensures that these countries—and all foreign producers—are held accountable. If Canada, Brazil or Mexico want continued access to the U.S. market, they must respect U.S. trade policies, adhere to agreements, and stop serving as conduits for China and other bad actors. There is every indication that these tariffs will take effect on March 12, as announced. Unlike previous administrations that have caved to pressure from multinational corporations, the Trump administration has made clear that tariffs are a key pillar of its economic strategy. The administration’s America First Trade Policy memorandum underscores its commitment to using tariffs as a tool for reindustrialization, revenue generation and economic security. Opponents of tariffs claim they will harm downstream industries, but the real threat comes from allowing foreign producers to flood the U.S. market and drive American manufacturers out of business. Without a strong domestic steel and aluminum industry, the United States would become dangerously dependent on foreign nations for critical materials used in infrastructure, defense and industrial production.”
Allison Fedirka, director of analysis at Geopolitical Futures: “The U.S. strategy is to use economic tools, like tariffs, to reset its trade relationships. President Donald Trump will likely move ahead with the tariffs to trigger 11th-hour accommodations or set the stage for future negotiations. Though the current U.S. order removed exemptions and quotas that existed during Trump’s first term, there is nothing preventing their reintroduction. In the case of Latin America, the countries of interest are Mexico, Brazil, Argentina, Colombia and Chile. Argentina, Colombia and Chile will see a low impact in terms of GDP. Even BBVA estimates that these tariffs will only affect 0.25 percent of Mexico’s GDP, not to mention that Mexico previously shifted steel melting and pouring to the United States to avoid tariffs. However, this issue is an important chess piece in the larger USMCA talks. Brazil will see a notable impact and has already begun strategizing its response. More importantly, the United States ranks as the top or second-largest export destination for these countries. The threat of these tariffs—and the promise of more to come—will be enough to bring them to the negotiation table. As for U.S. industries, companies have had ample lead time to draft contingency plans. They also have experience from the first Trump administration. Another issue exporting countries and the U.S. industry will need to keep in mind is the domino effect of tariffs in terms of other sellers looking to reposition themselves in global markets and potential new competition arising.”
Tapen Sinha, professor of risk management at the Instituto Tecnológico Autónomo de México: “This proclamation is a repeat of what happened in 2018. On March 8, 2018, President Trump, under Section 232 of the Trade Expansion Act of 1962 imposed a 25 percent tariff on steel imports. But that time, Canada and Mexico were excluded. It was pulled back over the next seven years. This time, Canada and Mexico are included. The tariffs also include aluminum along with steel. The United States imports 26 percent of the steel it consumes and 44 percent of the aluminum it uses. The impact will be a price rise of 8 percent for steel and 6 percent for aluminum. It would mostly affect industries like automobiles, general manufacturing, construction and industrial tools. Affected countries (and clusters) like Brazil, Canada and Mexico, as well as the European Union, will likely impose tariffs on other goods as a retaliatory measure. Some countries and companies would seek exemptions by lobbying President Trump. More than 1 percent of the GDP of both Canada and Mexico comes from steel and aluminum. Therefore, they are the most likely candidates for seeking exemptions. President Trump might not stop at aluminum and steel. He might move to other sectors like banking where he claims Canada is taking advantage of the United States. There is no end to any trade war for Mr. Trump. He is pretending that such trade wars are necessary for his America First policy. In reality, it is a populist move.”
Nicolás Mariscal, member of the Advisor board and chairman of Grupo Marhnos in Mexico City: “These are difficult times for free trade and the North American region. Nevertheless, let us remember that back in 2018, President Trump imposed a 10 percent tariff on steel and aluminum, although such a measure was suspended in May 2019. Fortunately, it lasted less than a year. Mexico provides around 3.5 million tons of steel annually to the United States. However, Mexico is the third-largest U.S. supplier, and the United States is the destination for 80 percent of Mexico’s exports. It was a good sign that Mexico did not respond in kind, as that would have affected the region further. A central issue is whether such tariffs will affect other industries, namely the automotive industry. If so, they would make our regional supply chains more expensive and, in the end, would make us less competitive. This case has been made by Mexico’s economy minister, Marcelo Ebrard. Moreover, Mexico imports more steel and aluminum from the United States than the United States imports from Mexico, delivering a favorable commercial balance to our northern neighbor. Let us hope that these protective policies do not continue. Mexico, Canada and the United States are more competitive through our free trade region. And unfair competition also comes from other places, notably from the other side of the Pacific Ocean.”
William A. Reinsch, senior advisor with the Economics Program and Scholl Chair in International Business at the Center for Strategic and International Studies: “It is always difficult to predict what President Trump will do, but with respect to steel and aluminum, it is likely the tariffs will go into effect. While the threatened broader tariffs on Canada and Mexico and the imposed tariffs on China were probably leverage moves designed to force negotiations, he imposed tariffs on steel and aluminum previously, argued that the exemptions granted and the deals made by his administration and the following one rendered them ineffective, and concluded they needed to be restored. Although the gap between the announcement and the effective date opens the door to bargaining, the line of countries requesting exemptions will be a long one, and Trump does not suggest great interest in negotiating new exemptions. If the tariffs are imposed, they will disrupt the U.S. economy. The United States does not currently make all the steel and aluminum products our economy needs, and it would not be able to fill the gaps immediately. The result will be higher prices for steel and aluminum products, adding further to inflation. The expansion of the tariffs to cover downstream products will only make that worse. Tariffs will also hurt our relations with exporting countries by demonstrating that the United States is an unreliable trading partner.”
The Latin America Advisor features Q&A from leaders in politics, economics, and finance every business day. It is available to members of the Dialogue’s Corporate Program and others by subscription.
