Posted on 25 Jun 2025
Trade negotiations between the US and Mexico are homing in on a possible quota system to reduce tariffs on a certain volume of steel imports, a move seen as assuaging concerns of American manufacturers of the metal.
The developing framework, described by people familiar with the talks, would alleviate crushing duties for some of the Mexican steel imports that US automakers and other industries have described as essential.
But the exemption — known in trade parlance as a tariff-rate quota — would be limited to a certain volume of imports, probably tracking the average amount shipped to the US during the 2015 to 2017 period.
The approach reflects the challenge facing American negotiators in trade talks with nations seeking lower rates or exemptions from a series of duties President Donald Trump imposed over the past several months.
The president’s team is being forced to balance conflicting interests: fulfilling his pledge of a US manufacturing renaissance while mitigating the impacts for domestic factories that have long relied on imported products.
Suddenly subjecting foreign materials to tariffs — such as the new, higher 50% levy on steel and aluminum — could deter manufacturing of goods made with them, even if the duties simultaneously help bolster US metalmaking.
White House spokesmen did not comment on the matter, and Commerce Department representatives did not respond to requests for comment. Mexico’s Economy Ministry had no immediate comment.
Discussions between the US and Mexico are continuing on several issues but are progressing toward an agreement, people familiar with the negotiations said. Mexico is the third-largest source of imported steel to the US, accounting for 12% of all foreign imports of the alloy.
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The tariff-free steel quota negotiators are discussing is set to reflect historical averages of imports from Mexico. Although varying time frames have been discussed, negotiations are focusing on the 2015-2017 period, said two people familiar with the matter. That would predate a surge in imports as well as a slowdown tied to the pandemic.
Using that time frame would mean about 2,799,228 metric tons, according to US Commerce Department data. Steel imports under any threshold specified under the deal would avoid the 50% tariff but are still expected to be hit with a 10% baseline charge, people familiar with the matter said. Amounts above it would be subjected to the full duty, said people familiar with the matter.
The proposed cap would equal 88% of the total steel US buyers imported from Mexico last year, when customers brought in 3,194,752 metric tons.
The plan addresses concerns raised by American steelmakers — who balked at a complete reprieve for imports from Mexico they said would undercut efforts to enhance domestic capacity.
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Setting the threshold below current demand would ensure a domestic market for American steel while providing some relief to US consumers of the metal. At the same time, it would allow the administration to provide some reprieve to a US partner.
Bloomberg News reported earlier this month that US officials were nearing a deal with Mexico to lift the existing tariffs in exchange for pledges not to exceed a soft quota. That stirred a flurry of lobbying by alarmed domestic producers, according to some of the people familiar with the situation. Commerce Secretary Howard Lutnick and his team then reevaluated the terms, those people said.
Supporters say the measure would meet the Trump administration’s goals of ensuring hard limits on tariff-free imports and rules for accessing the US market, rather than alternative approaches that could easily be abused. Tariff-rate quotas have a long history in the US, having been imposed to regulate trade in everything from sugar to solar cells.
The Trump administration already used a similar approach in its trade accord with the UK, which allows 100,000 vehicles to enter the US at a combined tariff of 10% instead of around 27.5%. The US also pledged to establish tariff-rate quotas on some volume of aluminum and steel — and their derivative products — imported from the UK.
Source:Bloomberg
