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Mexico seeks exemption from Canada's steel tariffs, considers retaliation

Sao Paulo — Mexico is seeking total exclusion from Canadian safeguards on steel products, but can ultimately respond with retaliatory measures, authorities said in an interview.

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The Canadian government announced October 11 it would introduce a provisional 25% tariff and quotas on certain steel imports, beginning October 25, in an effort to prevent the diversion of cheap foreign steel imports into the country. The US, Chile and Israel were exempted from the tariffs, while Mexico is partially exempted.

Canada's new tariff will apply to seven imported steel products -- heavy plate, rebar, energy tubular products, hot-rolled coil, pre-painted steel, stainless steel wire and wire rod -- in cases where the level of imports from trading partners exceeds historical norms, according to Canada's Department of Finance.

The impact on Mexican steel exports to Canada may reach at least $200 million, according to Idelfonso Guajardo, Mexican Secretary of Economy. "Mexico deeply regrets the decision announced by the Canadian government to establish safeguards to certain families of steel products, which will affect Mexican exports of energy tubular products [127,000 mt/year] and wire rod [62,000 mt/year]," the secretary said.

The provisional safeguards will remain in place for 200 days, pending an investigation by the Canadian International Trade Tribunal, which will determine whether final safeguards are warranted.

According to Rogelio Garza, undersecretary of the industry and commerce of the Secretary of Economy, Mexico will try to prove its exports do not harm the Canadian market, demanding Canada to compensate payments of fees paid by Mexican exporters during this preliminary period.

In another scenario, Garza said, there is the possibility of Mexico imposing retaliatory measures before the conclusion of the Canadian investigation.

Mexico imposed in June 15%-25% tariffs over imported steel, but excluded the US and Canada. "The decision of Canadians affects the regional integration of the North American steel industry," Guajardo added.

Mexico has never imposed retaliatory measures against Canada, with whom it has a free trade agreement since 1994.

--Adriana Carvalho, adriana.carvalho@spglobal.com

--Edited by Pankti Mehta, pankti.mehta1@spglobal.com