Mexico: trade uncertainty weighing on markets

Mexico has unveiled plans for import tariffs across 1463 product categories from countries without free trade agreements. This sweeping measure spans multiple sectors; in automotive, for instance, light vehicles from China, South Korea, India and Thailand could face duties of up to 50%.

Meanwhile, a legislative bill proposes a 10% tariff on primary aluminium imports. However, this rationale is questionable: Mexico does not produce primary aluminium and has only very limited capacity in flat-rolled products. The proposed measure is unlikely to protect domestic industry and instead risks raising costs for downstream manufacturers.

Across the border, the USA has added to trade jitters by slapping a 25% duty on heavy-duty truck imports and launching a Section 232 probe into medical equipment and devices. With protectionism rising on both sides, industry players are grappling with volatile supply chains and costs. Uncertainty is weighing on investment in both Mexico and the USA. The latest US manufacturing PMI reading has stayed below 50, signalling continued contraction and underscoring how policy turbulence is dampening factory activity.

Mexico’s aluminium scrap market is also adjusting to these changes. Demand for clean mill-grade scrap is balanced mainly because domestic casthouses have cut output and turned to cheaper imported billet and slab instead of melting scrap. At the same time, a strong US appetite is pulling much of Mexico’s mill-grade scrap north. These exports are effectively offsetting reduced local usage, keeping the market in equilibrium for now.

In the secondary aluminium segment, high-silicon scrap and alloy ingot prices have surged. A shortfall at a major smelter left end-users scrambling for alloy ingot, forcing them to seek extra supply from competitors. Those suppliers responded by paying up for scrap and charging premiums for the additional volume. This scramble has driven scrap costs higher and forced buyers to pay more to keep their furnaces fed.

The tight scrap situation is fuelling talk of export restrictions in Mexico. No official limits exist yet but pressure is mounting - especially if the USA does not agree to a framework ensuring fair conditions for Mexican industry. Measures from export taxes to quotas are being floated to retain more material at home if needed.

Amid these challenges, BIR remains a crucial platform for dialogue and policy guidance. I look forward to joining colleagues at the upcoming Convention in Bangkok where our collective expertise can help chart strategies to defend the free trade of recyclable metals while safeguarding competitiveness in an increasingly protectionist world.