U.S., Mexico near deal to lower steel tariffs

The U.S. is closing in on a deal with Mexico that would reduce the tariff rate on a certain amount of steel imports from the country, Bloomberg first reported, potentially easing some cost pressures throughout the HVAC supply chain. 

Why it matters: While most HVAC products from Mexico, which accounts for roughly 40 percent of the industry’s manufacturing capacity, are currently exempt from tariffs, steel imports are not. Mexico is the third-largest source of steel imports to the U.S.  

What’s happening: Talks between the countries are “honing in on a possible quota system to reduce tariffs on a certain volume of steel imports,” Bloomberg writes. 

• Imports below any agreed-upon volume under the deal would face a 10 percent tariff rate, compared to today’s 50 percent, the company notes. “Amounts above it would be subjected to the full duty,” it adds.

Zoom out: While the Trump administration has slapped tariffs on dozens of countries across the globe, including China, the U.S.’s second-largest source of HVAC imports, the exemption for HVAC products from Mexico has stood the test of time, and there’s been no recent indication this will change.

• Meanwhile, a 90-day tariff pause announced in April that lowered most countries’ rates to 10 percent — allowing time for the U.S. to cut deals — expires July 9.

Looking ahead: The Mexico deal is progressing, but it’s unclear how soon, if at all, it’ll be finalized, along with the extent to which — and how quickly — any changes would ripple through the supply chain to contractors and, ultimately, consumers. 

• The White House didn’t return a request for comment.