President Donald Trump plans to impose a 25pc tariff on all imports from Mexico and Canada, which could increase costs for US steel producers and fabricators. The proposed tariffs could have far-reaching effects on the steel and manufacturing industries in the three North American countries. The additional 10% tariff on China, which could raise existing tariffs by up to 60% on all steel imports, is estimated to have little impact on the US steel and scrap markets due to the already low volume of imports from that country.
Many market participants are waiting to react until more details on the plan are formalized. Some expect the list to be refined, while others see this commitment as a negotiating strategy for broader trade agreements. Some US scrap importers have begun to lightly sketch out what the tariff would mean for their raw material supplies.
Trump's announcement did not specify how the proposed import tax would interact with existing Section 232 tariffs on steel and aluminum, which were imposed by his first administration in 2018 on national security concerns. Canada, Mexico and several other key countries have been exempted from Section 232 tariffs, while other countries have seen tariffs removed and a non-tariff quota system implemented.
US steelmakers could be significantly affected by an import tax on ferrous scrap, as Canada and Mexico are the two largest shippers of the material. The US has imported 5 million tons of ferrous scrap annually over the past three years, with import volumes reaching 3.5 million tons in September. The Upper Midwest and Detroit region will be particularly affected due to the volume of scrap sourced from Canada. The tariff could lead to reduced volumes in the US and increased regional demand for scrap.
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