Tariff impact on steel may be minimal as trade small

2024-05-18 08:49:41China Daily Editor : Li Yan ECNS App Download

The impact of additional tariffs by the United States on the Chinese steel industry is likely to be minimal given the small size of direct trade, said analysts, noting the move is more about political posturing than economic issues.

However, certain industries that are considered large steel consumers, like electric vehicles and port cranes, are also subject to additional tariffs, which might affect China's indirect export of steel to the U.S., they said.

The remarks came after the Joe Biden administration announced on Tuesday additional tariffs on imports of certain products from China, including a more than threefold increase in the Section 301 tariff rate for Chinese steel imports, which will be 25 percent from this year.

The China Iron and Steel Association said on Thursday that China's exports of steel products to the U.S. account for a very small proportion of its total steel exports, and the amount of steel imported by the U.S. from China is also a fraction of its total steel imports.

It said the impact of the U.S. additional tariffs on the Chinese steel industry will be limited.

China accounted for less than 1 percent of U.S. steel imports in the first two months of 2024, and the U.S. accounted for just 0.8 percent of Chinese steel exports, said a recent report from S%26P Global, an energy and commodities market analysis provider.

The report said given the upcoming U.S. presidential elections in November, the timing suggests the additional tariffs are a political move rather than purely economically driven.

"China's steel exports to the U.S. have been on a downtrend in recent years. In 2023, China's steel exports to the U.S. totaled only 815,000 metric tons, while in the same year, China's total exports of steel were as high as 95 million tons," said Ge Xin, deputy director of the Lange Steel Information Research Center.

Zhou Mi, a senior researcher at the Chinese Academy of International Trade and Economic Cooperation, said the impact of additional tariffs is unlikely to be significant given the already significant range of tariffs imposed on Chinese steel.

"Many steel companies have already considered the risks of additional tariffs from the U.S. when venturing abroad. Direct steel exports to the U.S. have been shrinking in the past years, and Chinese steelmakers are diversifying their export markets," Zhou said.

Lin Boqiang, head of the China Institute for Studies in Energy Policy at Xiamen University, said:"The United States has been imposing tariffs on Chinese products. However, most of this burden will be passed on to U.S. consumers. And Chinese companies have other options for exporting and building factories, such as India and Mexico."

The U.S.' finished steel import market share was around 21 percent in 2023, data from the American Iron and Steel Institute showed. Canada, Mexico and Brazil were the main sources of U.S. steel imports last year.

"However, attention should be paid to the indirect impact of this move. The products subject to the additional tariffs this time also include electric vehicles and port cranes. These are also large steel users. It may affect the scale of indirect export of steel products," Lin said.

The CISA said the World Trade Organization has long ruled that the Section 301 tariffs violated WTO rules. Instead of correcting this, the U.S. has further increased tariffs. The non-market behavior of the U.S. has distorted the global steel trade order, which is detrimental to the healthy development of the global steel industry.

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