US increases tariffs on steel and aluminium

President Donald Trump signed an executive order imposing a 25% tariff on all steel and aluminium imports. These tariffs not only potentially violate US trade agreements but also pose a risk to the stability of trade in North America. 

Which are the goods involved?
To begin with, it is important to note that this tariff increase is global in nature. The Trump administration decided to impose tariffs on all countries, with no exceptions. Unlike the tariffs President Trump imposed in his first administration, the new tariff increase is set to impact primary steel products (such as slab and plate) and basic aluminium, as well as finished steel industry products (such as sheet and pipe) and aluminium extrusions. According to the executive order, if steel is melted & poured in the US, then these tariffs will not apply to the finished steel products.

Why is the US imposing tariffs?
The Trump administration argues that steel and aluminium are critical industries in the US economy and that the protection of these industries is a matter of national security. Under these premises, President Trump imposed the new tariffs under Section 232 of the Trade Expansion Act.

Do these tariffs breach US-Mexico trade agreements?
Yes, the increase in steel and aluminium tariffs violates, in its face, both the General Agreement on Tariffs and Trade (GATT) of 1994 and the United States-Mexico-Canada Agreement (USMCA). On one hand, the GATT states that countries must maintain tariffs equal to or lower than the maximum tariff to which they committed in their annexed product list. The US has an average maximum tariff of 2.5%. Therefore, imposing a global 25% tariff is inconsistent with this international agreement. On the other hand, the USMCA situation is almost identical, since the US has committed to maintain a 0% tariff for Mexican steel and aluminium products.

To justify this tariff increase, the US invokes the “national security” exception provided in Trade treaties. However, are Mexican imports really a threat to the US?

From which countries does the USA import steel?
In 2023, the main suppliers of iron and steel imports into the United States under Heading 72 of the Harmonized System were the following: Canada, Brazil, Mexico, South Korea, and Germany. Similarly, the main countries that exported derivative steel products under Heading 73 of the Harmonized System to the US were: China, Mexico, Canada, Taiwan, and South Korea.

Despite Mexico being one of the main steel suppliers, the US has a surplus in its steel and aluminium products Trade balance with Mexico. In other words, Mexico has a trade balance deficit with the US, as highlighted by the Ministry of Economy on February 11, 2025.

When will these tariffs enter into force and will they be suspended?
The new tariffs will enter into force on March 12, 2025. Unlike the IEEPA tariffs specifically imposed on Mexican and Canadian products, which were suspended, there is no agreement to suspend or delay their implementation as of today. The Minister of Economy, Marcelo Ebrard, stated that he will be in communication with the Department of Commerce and the US.

How will this US tariff increase affect Mexico?
In 2023, the Mexican steel industry had a notable dependence on its US export market. Per UNCTAD's trade maps platform, Mexico steel exports to the US represent more than 87% of its total steel exports. This close commercial relationship underscores the magnitude of the impact that the tariffs imposed by the Trump administration could have on the steel industry in Mexico. The new tariffs will increase costs and decrease the competitiveness of Mexican products in the US market. Consequently, Mexico faces a challenging scenario, as steel companies could experience a reduction in their export sales volume, affecting producers, workers and the entire value chain linked to this economic activity.

Will Mexico retaliate against the US?
As of today, Mexico has not declared that it will adopt commercial retaliations. The Mexican Chamber of the Iron and Steel Industry (Canacero) stated that it is waiting for us to understand the full scope and impacts of the measure in the coming days to decide their next steps. Additionally, Canacero declared that “if necessary, Mexico must apply proportional and immediate retaliations to the steel products from the US exported to our country.”

However, imposing tariffs to US steel could affect the value chains in Mexico. The main question is whether Mexico can legally and unilaterally retaliate adoptions without exhausting the dispute settlement procedures provided in the treaties. 

Remarks and insights
The imposition of new steel and aluminium tariffs by the Trump administration raises questions about the future of trade in North America, the international rule of law and the steel industry in Mexico. On the one hand, it will be important to observe whether these tariffs are part of a negotiating strategy by the Trump administration to actually “adjust” trade with certain countries. Meanwhile, the US steel industry welcomes this milestone, but conventional wisdom tells us that these types of measures will end up raising the costs of imports of raw materials and finished products for the manufacturing industry, affecting end-consumers.

On the other hand, the Mexican government will have to define a clear position and an effective negotiating strategy with the US authorities. Minister Ebrard's response suggests that Mexico will bet on dialogue and reaching an agreement, but it remains to be seen whether these efforts will succeed in slowing down or softening the application of the tariffs. 

Mexico is facing a new negotiation, and it will not be the last, since Trump stated that his team will also review measures against semiconductors (“chips”) and cars in the short term.

You can find more information and insights here or alternatively contact Adrian Vazquez at adrian@vtz.com.mx

Event:

In light of the upcoming tariff reforms announced by the Trump administration, AGA is pleased to announce an exclusive online event designed to provide guidance and offer strategic insights to AGA members and their clients. The session will feature experts from our member firms in Australia, Brazil, Canada, China, Germany, Mexico, and the US, who will break down the complexities of the proposed/in-place tariffs. Members can find out more here. 

About Vazquez Tercero & Zepeda:

Vazquez Tercero & Zepeda (VTZ) AGA's law firm representative in Mexico specializes in international trade, customs law, tax law, regulatory (sanitary & food-safety law), commercial, and administrative litigation. Their mission is clear: to solve complex legal problems and provide legal certainty to the businesses and commercial operations of companies, domestic or international.