USTR to Investigate China's Steel, Maritime, Logistics Sectors

The US Trade Representative (USTR) announced today the initiation of an investigation into the actions, policies, and practices China has allegedly taken to dominate the maritime, logistics, and shipbuilding sectors. This comes after months of tension where the United States has threatened possible resumption of Section 232 tariffs on steel from Mexico.

"The allegations reflect what we have already seen across other sectors, where China utilizes a wide range of non-market policies and practices to undermine fair competition and dominate the market, both in China and globally,” says Katherine Tai, US Trade Representative.

The move follows a petition filed by five US labor unions. The petition, lodged on March 12, 2024, under Section 301 of the Trade Act of 1974, alleges that China has employed unfair, non-market policies and practices to assert dominance in these crucial sectors. Section 301 of the Trade Act provides a mechanism for addressing unjustifiable, unreasonable, or discriminatory foreign government practices affecting US commerce. In this case, the investigation seeks to determine whether China's actions burden or restrict US commerce through unreasonable or discriminatory means.

The investigation, as per Section 301(b), necessitates consultations with the foreign government in question. USTR has already requested consultations with China to address the concerns raised.

The decision to investigate China's practices arises against a backdrop of increasing tensions and concerns surrounding trade dynamics between the United States, China, and Mexico. 

Mexico’s Deputy Minister of Foreign Trade reports that the Mexican economy received a significant influx of foreign capital between January and December 2023. A total of 378 investment announcements have been identified, with an expected investment of US$110,744 million. This amount is expected to flow into the country over the next two to three years. Among the main investors, the United States stands out as the largest contributor, representing 38% of total projected investment, closely followed by China with a 12% share. Sectors such as energy, construction, semiconductors, and electronics are among the focal points of foreign investors. There is also significant interest in industries complementary to the automotive sector, such as steel.

The Ministry of Economy adds that, during the same period, the FDI from China to Mexico reached US$151 million dollars, mainly distributed in new investments and reinvestment of profits. Net trade between Mexico and China has experienced a significant increase in recent years. Since the onset of the pandemic, imports from China have increased from US$4.75 billion to US$9.81 billion in January 2024.

In a report published by the Chinese-Latin American Research Center Andrés Bello Foundation, Erik Von Uexkull, Senior Economist for Latin America and the Caribbean, World Bank, says that Mexico has absorbed about 6% of the production relocated from China.

The Alliance for American Manufacturing (AAM) argues that China poses an escalating threat to the US auto industry in the “On a Collision Course, China’s Existential Threat to America’s Auto Industry and its Route Through Mexico” report. The AMM says that Chinese-owned and affiliated companies are increasingly infiltrating North American automotive supply chains via Mexico, capitalizing on the USMCA's lenient rules for regional content calculation. 

Alleging concerns over surges in Mexican steel imports and the need for swift action to protect US steelworkers, US Senators Sherrod Brown and Tom Cotton are spearheading bipartisan legislation in the US Senate: the Stop Mexico’s Steel Surge Act, which would reinstate 232 tariffs on Mexican steel imports at 25% for no less than a year. It would also give the US President authority to impose additional quotas and tariff rate quotas on specific products if needed. 

In a recent statement by the US Senate Democratic Caucus, Majority Leader Charles Schumer alleged that China is flooding global markets with cheap steel and aluminum, effectively undermining fair competition and dominating industries to maximize profits. Schumer also commended President Joe Biden's call for measures to prevent companies from rerouting steel and aluminum imports through Mexico to evade tariffs. 

On Feb. 16, Mexico's Minister of Economy Raquel Buenrostro met the US Trade Representative to discuss the importance of dialogue as a fundamental pillar for the success of the commercial relationship between both countries. In 2019, Mexico took steps to harmonize tariffs on steel and aluminum with the United States.

Mexico’s National Chamber of the Iron and Steel Industry (CANACERO) argues that it is false that Mexico acts as a bridge for the triangulation of Chinese steel products to the United States. CANACERO says that Mexico and the United States have forged a robust partnership to safeguard the North American region from unfair trade practices in the steel sector. CANACERO also shares that 49% of US steel exports head to Mexico, adding that the country’s steel exports to the United States are in compliance with international trade regulations, including those outlined in the USMCA and the Joint Statement for Mexico's exemption from Section 232 measures. 

Mexican Senator Verónica Martínez asked the Ministry of Economy on Feb. 25 to continue defending steel produced in Mexico, with the aim of providing certainty and fair market conditions for all sectors. Martínez warns that the allegations that Mexico serves as a conduit for Asian products entering the US market could result in restrictive measures by the US government against Mexican steel. She adds that measures taken by CANACERO through initiatives such as the Customs and Border Protection (US CBP) pilot program will increase the traceability of Mexican steel, streamline customs processes, and ensure compliance with legal regulations.