It looks like the United States could agree to replace Section 232 tariffs on Canada and Mexico with quotas, by the end of November.
In a Fastmarkets AMM interview, at the World Steel Association annual conference, Thomas J Gibson said, “That’s being discussed at high levels by the governments right now.” Gibson is the president and chief executive officer of the American Iron & Steel Institute (AISI).
The primary reason for tariffs or quotas is to limit steel imports and raise domestic steel production.
A trilateral trade agreement, the US-Mexico-Canada Agreement (USMCA), was agreed to September 30. It will replace the North American Free Trade Agreement (NAFTA).
Gibson also added, the governments agreed to discuss Section 232 after the USMCA agreement.
Arguably, Section 232 is serving its purpose. Imports are down 11% on the year. Also, domestic mill capacity utilization rates are greater than 80%, which was a goal of Section 232.
Section 232 is needed to keep the domestic mill capacity utilization rates in mid-to-high 80% range. These are levels not seen since before the 2008 financial crises.
In addition, duty circumvention and international steel overcapacity are issues that make Section 232 necessary.
For those that argue Section 232 disrupts manufacturing supply chains – the risk of being dependent on foreign steel has more serious national security consequences.
Support for the US steel industry and related issues is strong. Infrastructure spending is another related issue to watch. President Donald Trump has pledged to spend $1 trillion on the US infrastructure.
Let us hope Congress will get an infrastructure bill signed quickly. Because nothing would be better for the steel industry than high demand.
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