Steel market participants mull the impact of US/Mexico S232 negotiations

One industry source said the current administration likely revisited its approach to Section 232 tariffs against Mexico for several reasons.

For starters, the US is a net exporter of steel to Mexico. And so applying a 50% tariff on steel from Mexico could result in retaliatory trade actions. For example, Mexico could add matching tariff rates on the US’s steel and aluminum exports. Or Mexico could divert its purchases away from the US and toward other trade partners.

In addition, the prospect of losing long-term contracts with Mexican partners puts US mills in a precarious position. Some have devoted decades to serving contract customers in Mexico. And they would be left scrambling to make up for that volume of they lost it.

During a Steel Market Update (SMU) Community Chat with Timna Tanners, managing director of equity research at Wolfe Research, made a similar argument.

“I think, 50% tariffs won’t stick. I think this will be part of the negotiation,” Tanners said.  

“It could be 25%, which will look like a win. But it will still keep steel prices higher for longer than the 0 (percent). But it will be better than today. That’s my sense,” she added.

A second industry source said the popular narrative that “Mexico floods the US market with steel” is a tired and unfounded one that is not supported by official US data.

The International Trade Administration (ITA) steel import monitor and analysis (SIMA) website shows imports from Mexico totaled 3.5 million metric tons (mt) in 2024. US exports of steel to Mexico in 2024 totaled 4.4 million mt.

The bigger issue is that Mexico is complicit in allowing third-party steel to enter the US. Some nations, for example, send their steel to Mexico for minimal processing or finishing. That material then passes through Mexico and into the US market without being subject to Section 232, the second industry source said.

Mexico and the US are likely negotiating a way to better collect data from Mexico to put an end to “this triangulation.” In short, Mexico must be able to prove it has the proper measures in place to ensure its steel exports to the US are not from anywhere outside the country, he said.