Dive Brief:
- A shift from levying tariffs to enforcing quotas on imported steel is likely as the U.S. trade war with China wraps up and the United States Mexico and Canada Agreement inches toward ratification, Steel Dynamics CEO Mark Millett said on the company's first-quarter earnings call last week. Imported steel has been subject to a 25% tariff for more than a year.
- "I think that will be a positive outcome for all three countries," Millett said of a tariff rate quota system based on "historic import levels with the tariff for any exceeding through the overlap."
- Millett said his expectations were based on company "intelligence."
Dive Insight:
Tariffs on imported metals like steel and aluminum have put the Trump Administration at odds with the governments of Canada and Mexico and Republicans in the U.S. Senate, all of whom say the USMCA cannot pass without removing the tariffs. Republican Senator Chuck Grassley expressed confidence that Trump will eventually see the removal of steel tariffs as a necessary step to push through the trade agreement, according to The Washington Post.
But Trump administration officials are reportedly putting the conditions of approving import quotas on the Mexican and Canadian delegations. The New York Times reported the administration is in favor of "permanent limits on the amount of steel and aluminum [Mexico and Canada] export to America each year," suggesting a firm ceiling on steel flowing to the U.S. from its immediate neighbors is the desire of the White House.
Notably, what Millett described is a tariff rate quota system, wherein the amount of metal flowing into the U.S. from Mexico or Canada would be subject to a tariff after a certain quantity is reached.
ArcelorMittal USA CEO John Brett reportedly told the U.S. Congressional Steel Caucus in March that quotas could serve a similar purpose as tariffs in bolstering the U.S. steel industry with the right conditions. Supporters of quotas see such provisions as protection from "dumping" of cheap steel into the market. U.S. Steel CEO David Burritt said at the hearing even the United States' "best allies" are guilty of this behavior, adding he would support a tariff rate quota or a hard quota.
But the opponents of replacing tariffs with quotas seem to be more vocal so far.
Mexico's Deputy Economy Minister Luz Maria de la Mora reportedly said last month that "quotas make no sense," according to Reuters. Ottawa is also reportedly not a fan.
Also against quotas are major aluminum industry players — who were much more vociferous opponents of Trump's original tariffs as well, likely due to the structure of the industry. Aluminum tends to cross the borders between the U.S. and its neighbors as it makes its way through supply chains.
