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Mexico to Propose Joint Steel Committee With US to Bolster Ties

(Bloomberg) -- Mexico will propose reinstating a North American steel committee to improve trade ties with the US and reduce reliance on Asian steel imports, according to a top trade official.

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As part of its negotiations with the US over steel tariffs, Mexico plans to float the idea of bringing back a committee comprising steel companies in both Mexico and the US, as well as government trade officials from both nations, said Luis Rosendo Gutiérrez Romano, Mexico’s deputy economy minister for trade. While negotiations have focused on the bilateral relationship, the committee proposal envisions including Canada down the line.

The committee would be similar to the former North American Steel Trade Committee under NAFTA, the trade agreement prior to the current USMCA between Mexico, the US and Canada. It would be tasked with building a stronger regional ecosystem including private sector actors rather than relying solely on government negotiations, said Gutiérrez.

For example, the committee would consider measures aimed at increasing Mexico’s purchase of US steel to replace Asian imports. The move would potentially enable Mexico to increase tariffs on imported Asian steel, said Gutiérrez, who’s seen as Mexico’s second-most important commerce negotiator.

“It’s something that the United States views very favorably and we view very favorably, because we have to work hand in hand,” he said. “We are looking at a series of trade practices to strengthen ourselves as a region, to protect ourselves as a region and to work together on a common policy that strengthens our industries.”

To address US concerns, in addition to the joint committee proposal, Mexico has closed 1,062 so-called “phantom” Asian steel mills, which are buildings that are registered as mills but don’t contain any actual steel operations and function as cover for foreign imports. About 40% were linked to China, 10% to India and 6% to Iran.

The government is also exploring domestic policies to increase local steel consumption, said Gutiérrez, such as having Mexico’s construction industry commit to buying local steel to offset a potential 5% to 10% drop in exports to the US.

The proposals come amid negotiations between Mexico and the US over its tariff policies, including crippling 50% tariffs on Mexican steel and aluminum. The measures have forced some steel producers to pause planned investments, such as the cancellation of a $600 million special steel mill proposed by Brazilian steelmaker Gerdau SA.

Gerdau Drops Mexican Steel Mill Plan Amid Trump Tariff Turmoil

Gutiérrez said that Mexico is prioritizing negotiating a deal to reduce tariffs for autos, steel and aluminum. Whether planned steel investment is withdrawn or even increased will depend entirely on the final terms of a possible steel agreement, he said. Investment “could go elsewhere, but it could also double,” he said. “This is an agenda that concerns us a lot, and we will not take our eye off the ball so that we can reduce the tariff.”