Latin America increases tariffs on Chinese steel
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In a sign of growing economic protectionism, various Latin American countries have followed the steps of the United States and Europe by imposing tariffs on steel imports from China, according to analysis compiled by Bloomberg.
In recent weeks, Mexico, Chile, and Brazil have increased, and in some cases doubled, tariffs on these products, while Colombia might soon follow suit.
This measure seems to contradict the landscape of trade relations that Latin America and China have cultivated in recent years. China has positioned itself as the main buyer of raw materials and a significant investor in the region. Latin America, in turn, has offered China an additional market for its products, especially amid the high tariffs it faces in the United States and Europe.
China has exported nearly 10 million tons of steel annually to Latin America, valued at approximately US$8.5 billion, according to data from the regional steel association, Alacero.
This strengthening of global protectionism and the flood of Chinese imports are testing the trade relationship between China and Latin America, potentially affecting 1.4 million jobs in the region. Margaret Myers, director of the Asia and Latin America Program at the Inter-American Dialogue, described this situation as an “important test of China’s interests and intentions” and of the “Latin American determination to challenge a critical economic partner.”
Brazil, for example, is preparing to implement a tariff quota system to counteract the predatory pricing of imported alloys. This is due to the 62% increase in Chinese shipments the country saw last year, reaching 2.9 million tons. Marco Polo de Mello Lopes, president of the industrial association Aco Brasil, stated that “it is a signal to the world that Brazil has rules, it is not no man’s land.”
However, these actions carry significant risks, especially for smaller, export-driven economies that rely on Chinese demand. Past examples show how Beijing is known to react by suspending purchases and investments, as happened with Argentine soybeans and Canadian canola after both countries implemented similar measures which China perceived as unfair.
The impact of restrictions on Chinese steel could be considerable, given that Chinese shipments to Latin America have displaced imports from Brazil, Mexico, and Colombia. Fabio Galán, CEO of the Colombian steel company Paz del Río, noted that discounts on Chinese steel prices, reaching 50%, have severely affected the local industry.
Moreover, Chinese investments in Latin America have been key in developing sectors such as energy, transportation, and mining, with an accumulated expenditure of US$187.5 billion between 2003 and 2022, according to the Inter-American Dialogue. However, the pace of these investments has recently slowed.
Current protectionism could jeopardize this investment and trade relationship. The newly imposed tariffs might have a limited impact on China’s vast steel production capacity, which amounts to one billion metric tons annually. Gustavo Werneck, CEO of Gerdau, one of Latin America’s largest steel producers, warned that these measures would not resolve the long-term competitiveness issues of the local industry, such as high energy costs.
Christopher Beddor, deputy director of China research at Gavekal Dragonomics, stated that Latin American countries now have more influence due to their importance as export destinations for China, but they still depend heavily on it, setting up a delicate balance in international trade relations.
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