Changes to Import Duties on Steel and Aluminum Articles Under Section 232 of the Trade Expansion Act of 1962

February 26, 2020
Patrick Scott provides an update on changes to duties on steel and aluminum article imports.

In May 2019, President Trump amended the import duties on steel and aluminum from three exporting countries: Mexico, Canada and Turkey. The amendment eliminated the 25% steel import duty and the 10% aluminum import duty on products originating from Canada and Mexico, which were first imposed in spring 2018 when the president put into action the much-talked-about Section 232 tariffs on steel and aluminum, regardless of origin. Just prior to the announcement concerning Mexico and Canada, the president issued a proclamation reducing the higher tariff of 50% on steel imports from Turkey to 25%, which is in line with most other countries.

Canada and Mexico account for approximately 30% of all steel imported into the United States, suggesting the elimination of the 25% tariff on steel imports from those countries will have a meaningful effect on steel prices. Since the announcement, hot-rolled coil prices fell 11.2% from $651 per mt to $578 per mt between May 1, 2019, and June 4, 2019, confirming the removal’s impact. As of June 2019, the price of steel was down nearly 20% since the beginning of the year and was below the pre-232 tariff price level.


Chart showing U.S. Midwest Domestic Hot-Rolled Coil (HRC) Steel Index Futures from January 2018 to February 2020

Aluminum prices were steady since the elimination of the 10% tariff on products originating from Canada and Mexico, having fallen only 1.9% between May 1, 2019 and June 4, 2019. From the beginning of 2019 to June, aluminum prices were flat, down just 0.9%.

 


Chart showing LME Aluminum Prices from January 2018 to February 2020


Chart showing U.S. Midwest Aluminum Premiums January 2018 to February 2020

What is not contemplated above and could further complicate the price of both commodities is the usage of tariffs by President Trump to negotiate a deal with Mexico concerning immigration policy. In June 2019, the president revoked a proposal that would have resulted in a 5% tariff on all goods imported from Mexico into the U.S. The proposal included monthly 5% increases until the tariff reached 25%. Although the proposal was revoked prior to being enforced, further tariffs, whether industry- or country-specific, remain an ongoing threat to the predictability of global commodity prices.

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