UPDATE 1-Mexico should seek tariff exclusion before closing NAFTA -steel lobby

lobby@ (Adds comments from CANACERO, background details)

MEXICO CITY, Aug 29 (Reuters) - Mexico should seek exclusion from U.S. tariffs on steel imports before closing the renegotiation of the North American Free Trade Agreement (NAFTA), the country's steel industry association CANACERO said in a statement on Wednesday.

Citing national security concerns, U.S. President Donald Trump slapped tariffs on steel and aluminum at the end of May after a so-called Section 232 investigation, prompting retaliation from trade partners including Mexico and Canada.

Mexico and Canada countered the move with a string of tit-for-tat measures on U.S. products like pork, ketchup and bourbon.

"It's difficult to understand how Mexico could accept updating NAFTA without resolving the problems created by the application of the measure under Section 232," CANACERO said.

The group said Mexico should impose equivalent measures against U.S. steel imports in the meantime in order to "level the playing field."

After more than a year of talks, Mexico and the United States announced a bilateral deal on Monday, clearing the way for Canada to rejoin talks to update 24-year-old NAFTA which accounts for over $1 trillion in annual trade between the three nations.

"It is imperative that the Mexican government defend its national industry and request the exclusion of Mexico from the 232 measure before closing the negotiation between the three countries," CANACERO said. (Reporting by Mexico City Newsroom Writing by Daina Beth Solomon and Anthony Esposito; Editing by Sandra Maler)