Final Thoughts

The US runs a steel surplus with Mexico

The US imported 3.52 million short tons (st) (3.19 million metric tons) of steel from Mexico in 2024, according to government figures. Mexico is the No. 3 source of imported steel in the US behind Canada and Brazil. And that 3.52-million st figure is 46% less than the 6.56 million st that came in from Canada and 22% less than the 4.50 million st that arrived from Brazil last year.

It’s also 27% less than the 4.81 million st the US exported to Mexico in 2024. In other words, the US runs a trade surplus when it comes to Mexico – at least when it comes to steel. (I know some would say it’s a different story when it comes to finished goods. But I’m sticking to steel here because we’re talking about a S232 that’s specific to it.)

Mexican trade association Canacero pointed earlier this year in an op-ed in SMU that the US has been running a steel trade surplus with Mexico for much of the last decade. In its op-ed, Canacero was largely trying to combat political narratives. Namely, election-year ones that incorrectly conflated immigration and steel imports.

The trade data simply didn’t fit those political narratives. I’d say it’s good news that US trade officials, regardless of party affiliation, are making policy based on the data instead of politics.

Besides, if Mexico were to retaliate and hit US mills with a 50% tariff, US mills might be hurt just as much, if not more than, producers in Mexico.

This isn’t exactly a secret. Steel Dynamics Inc. (SDI), for example, built a new mill in Sinton, Texas, in part to serve growing Mexican demand. SDI Chairman and CEO Mark Millett said last year that Mexico will be “steel short.” And SDI is hardly the only EAF steelmaker in the US that sells into Mexico.

TACO Tuesday or wrong expectations?

So why did the floor fall out from under steel equities and futures earlier this week? You can chalk that one up to how quickly trade policy can change in Trump 2.0.

President Trump indicated that there would be no exceptions to the 50% tariff when he announced it at a rally near Pittsburgh on May 30. National Economic Council Director Kevin Hassett said shortly before the 50% was implemented that there would be “few” exceptions. And the presidential proclamation on June 3 that officially enacted the 50% tariffs granted an exception only to the UK.

Recall that the UK has a framework trade deal with the US. Its Section 232 tariff was kept at 25%.

There was chatter almost as soon as Trump announced the 50% that it might not remain in place for long, that it was mostly a negotiating tool. But most people I talked to figured it would be in place for at least a quarter, maybe until the end of the year.

In essence, Trump didn’t like the TACO narrative, and so there was no way he would immediately reverse course. And, after all, Section 232 tariffs on Canada and Mexico remained in full force for roughly a year (May 2018 to May 2019) during Trump’s first administration.

So, it was a shock to the market when news broke that the tariffs on a key trading partner might be watered down less than a week after they were implemented. Basically, prices and equities didn’t tank on a fear of Mexican steel flooding the US market. They fell because the assumption that tariffs would remain in place, at least for a while, turned out to be wrong.

Survey says

We know tariffs have become increasingly unpopular among our readership based on surveys going back to mid-March. And this latest round of tariff whiplash probably didn’t help.

We’ll know for sure when we release full results of SMU’s steel market survey on Friday to our premium members. (Reminder: If you’d like to upgrade from executive to premium, please contact SMU account executive Luis Corona at luis.corona@crugroup.com.)

More uncertainty around tariffs might explain why our Current Buyers’ Sentiment Index has fallen to its lowest level since June 2020 – at the height of the Covid lockdowns. (That’s a sneak peak, btw. We’ll release sentiment data on Friday too.) And it’s not just tariff uncertainty, it’s also uncertainty about demand.

Even so, this isn’t 2020, and day-to-day business goes on. I still think we made the right move in switching our sheet and plate pricing momentum indicators to Higher on Tuesday.

We’ve already got some evidence to support that decision. Lead times, which we updated on Thursday, have extended for the first time in a while. And mills are less willing to negotiate lower spot prices than they were two weeks ago, according to our latest data.

I think longer lead times and mills being firmer on prices reflect the impact of tariffs. Buyers knew that prices next week would be higher than those this week because the floor provided by imports was higher. And if they were on the fence about buying, tariffs were a good reason to get off of it. We also know that some buyers have shifted purchases from imports to domestic mills because of the higher Section 232 tariff.

Maybe we’ll see lead times continue to extend and mills continuing to increase spot prices. But whether those trends are durable might depend less on presidential proclamations than it does on demand. And while the president has a lot of power – including a potential 51% stake U.S. Steel – he hasn’t to date been able to increase demand for steel-intensive goods.

SMU Community Chat

Speaking of demand, the construction sector is one of the most important markets for steel. And it will be the focus of our next Community Chat on Wednesday, June 25, at 11 am ET with Ken Simonson, chief economist for the Associated General Contractors (AGC) of America. You can sign up here.

Simonson will discuss whether the construction market will thrive or dive in what’s left of 2025. To do that, he’ll delve into the outlook for specific constructions sectors and geographies as well as for construction employment. He’ll also look at how some of today’s hot-button issues – including higher tariffs, an immigration crackdown, and interest rates – are influencing that outlook.

So, mark you calendar for June 25. And don’t forget to pack some good questions for the Q&A!