With Proposed U.S. Import Tariffs on Steel and Aluminum, a New Wave of the Trade War Is Coming

Basic Iron And Steel February 20, 2018
Author: Alexander Romanenko
Chief Executive Officer

On February 16, the U.S. Commerce Department outlined an array of options that President Donald Trump could take to help domestic steel manufacturers to stay competitive on the local market, including a tariff of at least 24 percent on steel imports from all countries. This measure will be considered as an unfriendly step, not only by China, the world’s largest steel producer and the strongest U.S. competitor on the global market, but also by U.S. allies like Canada and the EU, who will suffer dramatically from the imposed tariff barriers.

This protectionist action was supported by the United Steelworkers Union and American steel companies, who claim that domestic manufacturers have suffered from the flood of cheap imports, particularly from China, thereby losing their position on the oversaturated market. Severe competition could result in a price slump, closing production facilities and cutting jobs.

It is no surprise that such ideas are very similar to President Trump’s approach to add new jobs by tightening trade agreements to the benefit of the U.S. Trump has already withdrawn the United States from the Asia-Pacific Trade Partnership, and has promised to do the same with NAFTA; renegotiations are also now in progress concerning the U.S.-Korea Free Trade Agreement (KORUS FTA).

While general talks on breaking up these agreements faces moderate negative reaction from U.S. trade partners, imposing tariff barriers would trigger considerable backlash.

Even though China is the world’s biggest producer of steel and aluminum, the volume of Chinese direct imports onto the U.S. market remains relatively insignificant: China’s share in total iron and steel imports did not exceed 3% (based on USD, 2016). Canada, a close U.S. ally, assumed the lion’s share in terms of its total imports (19%), meaning that it would suffer badly from imposed barriers.

China has already replied that these measures are groundless and that it reserves the right to retaliate if they are enforced. Japan and India, ranking second in the list of biggest producers, expressed their concern and regret, but are not in a rush to expose any retaliatory actions.

So, we’re waiting for Canada’s reaction. It’s worth noting that the trade dispute between Donald Trump and Justin Trudeau intensified after the U.S. proposed higher tariffs on dairy and lumber from Canada last year. As for now, the Canadian government spokesman Adam Austen just made the point that Canada buys more U.S. steel than the rest of the world combined.

Source: U.S. Iron, Steel And Ferroalloy Market. Analysis And Forecast to 2025