The United States is finalizing an agreement with Mexico to allow a 50% steel tariff exemption quota.

Steel and aluminum prices have risen sharply in the United States since Donald Trump decided to raise tariffs on those products to 50%. The president seems ready to take another step back in his erratic trade policy. According to Bloomberg, the United States and Mexico are close to finalizing an agreement that would eliminate the 50% tariffs on steel imports up to a certain volume, according to sources familiar with the matter.

During his first term, Trump reached a similar agreement with Mexico before signing a free trade deal with his southern neighbor and Canada that has been disregarded in his second term.

Trump has not participated directly in the negotiations but would need to sign any agreement, as he has the authority to set those tariffs based on a supposed threat to national security. So far, Trump has reversed many of his tariff decisions upon realizing their disastrous effects on the economy. This led to the popularization of the acronym TACO, which stands for Trump Always Chickens Out.

The talks are being led by Secretary of Commerce Howard Lutnick, according to sources quoted by Bloomberg, who requested not to be identified due to the private nature of the discussions. Although the agreement is not finalized, the terms being discussed would allow U.S. buyers to import Mexican steel tariff-free as long as they kept their total shipments below a level based on historical trade volumes. The new limit would be higher than what was allowed in a similar agreement during Trump’s first term, according to Bloomberg, which was never a fixed figure but was designed to “avoid sudden increases.”

The publication of the news by Bloomberg caused shares of U.S. steel companies to drop on Tuesday.

U.S. steel imports from Mexico amounted to about 3.2 million metric tons last year, representing 12% of total shipments of this material, according to data from the Department of Commerce cited by Bloomberg. The agreement reached by the United States with Mexico in 2019, during Trump’s first term, aimed to prevent import volumes from exceeding the average levels of the 2015-2017 period.

Special Treatment for the United Kingdom

Trump signed a decree last Tuesday that raised tariffs on aluminum and steel imports from 25% to 50% starting the following day, as he had announced the week before.

The text of the decree exempted the United Kingdom from the increase, citing the non-binding agreement that Washington and London signed last month, which aimed to establish quotas, seemingly paving the way for similar agreements.

The exemption for the United Kingdom is not permanent. Trump’s order states that Secretary of Commerce Howard Lutnick can adjust the tariff and establish import quotas for steel and aluminum starting July 9, in accordance with the terms of the agreement, or raise the tariff to 50% if it is determined that the United Kingdom has not met the relevant aspects of the deal.

In the text of that agreement, it was stated that the United Kingdom would work to promptly meet the United States’ requirements in terms of supply chain security for steel and aluminum products intended for export to the United States and regarding the ownership nature of the relevant production facilities. “With the understanding that the United Kingdom will meet these requirements, the United States will promptly establish a quota with most-favored nation (MFN) rates for the steel and aluminum of the United Kingdom and certain steel and aluminum derivative products,” it added.