US tariffs increase production costs, helping Mexico: Coface
French credit insurance group Kofas expects prices to rise in the United States as a result of President Donald Trump's 50% tariffs on European steel and derivatives.
In the medium term, higher domestic metal prices may affect profit production, especially in the U.
S. automotive industry. Ironically, higher tariffs in the US may end up helping Mexico in the long run. Most of Mexico's automobile exports to the United States are exempt from duties, as they comply with the provisions of the Agreement between the United States, Mexico and Canada. However, due to the difference in production costs compared to the United States, which is currently being compounded by recent new tariffs, car manufacturing in Mexico is expected to become even more competitive.
"Washington continues to raise tariffs on steel and aluminum, reducing the profits of American manufacturing companies without any consequences. confidence in the revival of its metallurgical industry." Coface analyst Simon Lacoume notes in a report obtained by Kallanish.
The announcement of the increase in tariffs on steel and aluminum from the EU was made around the time when the strategic partnership between US Steel and Japan's Nippon Steel began. The Japanese conglomerate intends to allocate $11 billion for the construction of production facilities in the United States over the next 14 months (see "Callanish" dated June 16). This significant investment is partly a reaction to the initial 25% steel tariffs imposed by the U.
S. government in March. From the point of view of the United States, these investments have several goals: they are aimed at reducing dependence on imports and simultaneously strengthening the domestic metallurgical sector.
However, the tariffs introduced in 2018 have not led to sustained growth in production or employment in U.
S. industries. A study conducted by the Federal Reserve Board of Governors shows that the increase in production costs associated with these tariffs is associated with the loss of 75,000 jobs in the domestic manufacturing sector.
The introduction of tariffs this year has led to higher prices for steel and aluminum in the United States. The US market. The S&P midwest premium steel price index rose by 20% in January. The long-term effects of tariffs on employment and productivity are not yet clear. Analysts note that rising domestic steel prices have had a significant impact on U.
S. manufacturing companies since 2018. The expected price fluctuations and rising costs are likely to create additional challenges for the lower levels of the value chain.
Natalia Capra France