Aug 23, 2023
Korea sees limited impact from Mexico steel tariff hike
2023-08-28
The Korea Iron and Steel Association (Kosa) expects a limited short-term impact from Mexico's tariff hike on steel imports, according to South Korea's trade and industry ministry (Motie).
Mexico last week raised import tariffs from 5pc to 25pc on steel from Asian countries, including South Korea. The economy ministry listed higher tariffs for 392 products from countries with which Mexico has no trade agreements, to take effect from 16 August to 31 July 2025. More than 200 of the products are steel and aluminum, in addition to chemical products and household items.
Of these items, 92 were South Korea's top 500 export items to Mexico last year — based on HS 6-digit codes — and among them, 74 items are steel products. Steel tariffs on South Korean products would be raised to 25pc from the current 10pc, Motie said.
Kosa expects Mexico's share of South Korean steel exports to fall. Mexico accounted for 7.8pc, or 2mn t of South Korea's 26mn t of steel exports in 2022. South Korean steel exports to Mexico were valued at $2.7bn last year, accounting for 8.3pc of South Korea's total export value of $32.9bn in 2022.
"It will be hard for South Korea to export hot-dip galvanised steel and colour-coated steel to Mexico now, which will be beneficial for Vietnamese products," a South Korean mill manager said on 23 August. "Export volumes to Mexico may not be huge, but South Korea has still lost an export destination for those products."
But about 85pc of Mexico's steel exports are exempt from tariffs because of the Mexican government's Program of Sectoral Promotion (Prosec), which will limit short-term impact, although impact on the remaining volumes will be inevitable, Kosa said.
Prosec aims to allow firms producing goods in designated sectors to import goods to be used in the production process at a preferential ad-valorem tariff between 0-7pc, regardless of whether these goods are for export or domestic use. This applies to steel for use in automobiles and electronics but not for general construction steel.
But it remains necessary to make long-term preparations as it is uncertain if Prosec will continue to be implemented, Kosa added.
"The trade environment surrounding the steel industry is rapidly changing, including the introduction of the EU's Carbon Border Adjustment Mechanism (CBAM), and Mexico's measures are part of this trend," said industry supply chain policy officer Yang Ki-wook. "The public and private sectors should respond by strengthening the competitiveness of the Korean steel industry and diversifying export destinations, and Motie will minimise the damage to South Korean companies through intergovernmental trade responses."
By Tng Yong Li
