Mexico revokes 20%-35% primary aluminum import tariff less than three weeks after implementation

Mexico's government revoked its 35% tariff on primary unalloyed aluminum and 20% tariff on primary alloyed aluminum less than three weeks after both duties were included in a larger package of tariffs announced on April 22.

"Currently there is no national production of primary raw aluminum (unalloyed and alloyed), and the availability of said merchandise in countries with which Mexico has signed an international treaty on trade matters is insufficient to satisfy the supply of the automotive industries... and electronics, among others," the government said in a decree published in Mexico's Diario Oficial de la Federacion May 8. "[This] is why it is necessary to delete tariff items 7601.10 (primary unalloyed aluminum) and 7601.20 (primary alloyed aluminum) of the decree referred to in the previous paragraph, in order to avoid affecting the operation of the supply chain of said industries."

According to the decree, the aluminum tariffs were originally included in the April tariff announcements to "provide certainty and fair market conditions for the sectors of the national industry that face situations of vulnerability, derived from practices that alter and affect international trade, and thus promote the development of the national industry and support the internal market."

Mexico's April tariffs covered over 500 product categories that encompass multiple industries. Several categories of steel, aluminum, and ferroalloy products were included in the list. The duty only applied to countries that do not have a free trade agreement with Mexico.

For aluminum, many types of products are still subject to tariffs ranging between 25% and 35%. These products include bars, rods, profiles, plats, sheet, strip, tubes, pipes and some extruded items like frames and thresholds.

North American aluminum prices have seen an uptrend since the tariffs were announced. The Platts Aluminum P1020 Transaction Premium delivered US Midwest was assessed at 19.55 cents/lb May 8, up from 18.20 cents/lb April 22, according to S&P Global Commodity Insights data.

Positive response from Mexican aluminum sector

The initial tariff on aluminum was seemingly implemented in response to pressure on the Mexican government from US trade officials and various North American aluminum industry trade groups to address the alleged influx of Chinese metal into Mexico and subsequent impacts to the US market. Lobbying from these groups focused on the need for Mexico to implement better trade monitoring and to specifically target metal from China, and also possibly from Russia.

Mexico's blanket tariff on all aluminum imports from non-free trade countries exceeded these pleas and caught many market participants by surprise, with some worried that the move would hurt the country's aluminum-consuming manufacturers, such as automotive parts makers, and cause inflation across the North American aluminum market.

Other observers believed the tariff would have a limited impact due to Mexico's rules and allowances for tariff exemptions.

Ultimately, the Cámara Nacional de la Industria del Aluminio, or Canalum, one of Mexico's major aluminum industry groups, said they asked Mexican trade officials to consider revoking the tariff on aluminum, and they welcomed the May 8 decree.

"On behalf of the national aluminum industry, we express our deep appreciation and thanks to Raquel Buenrostro [Mexico's Secretary of Economy] for her sensitivity to this request, considering the capabilities and needs of Mexican companies and maintaining the competitiveness of key value chains for the national industry," Canalum said in a statement May 9.

"Likewise, we recognize the commendable work of Mr. Alejandro Malagón Barragán, president of the National Confederation of Industrial Chambers of the Mexican Republic, for the adjustment to the conditions of the decree, and for the great capacity to bring together in unity the efforts of the various industries and their chambers, agencies and institutes."

US-Mexico-China aluminum trade flows

US aluminum imports from Mexico reached about 105,000 mt in 2023, according to data of products tracked by the US Commerce Department within its aluminum import monitoring system. Compared with a decade earlier, aluminum imports were up from 55,300 mt in 2013.

The data has led US aluminum industry groups, such as the Aluminum Association and Aluminum Extruders Council, to scrutinize the higher import volumes from Mexico and potential transshipment of aluminum from China to the US through Mexico, thus evading US tariffs.

Trade data from S&P Global's Global Trade Analytics Suite shows Mexico's imports of unwrought aluminum from China rose to nearly 20,000 mt in 2023 from 10,000 mt in 2018. Shipments of plate, sheet, and strip also rose to more than 445,000 mt from about 164,000 mt in the same comparison.

GTAS import data for Mexico is derived from bill of lading statistics collected from third-party sources.