China vows to retaliate to U.S. tariffs on steel and aluminium as prospect of trade war looms

by | 19 Feb, 2018

Will this move on steel and aluminium imports lead to further tussles between China and America?

The Chinese government in Beijing has confirmed it will retaliate if the Trump administration goes ahead with a plan to place tariffs on steel and aluminum imports from China and other nations including Brazil.

In the latest progression in tensions between the 2 countries, Wang Hejun, a senior official at China’s Commerce Ministry said: “If the final decision from the U.S. hurts China’s interests, we will definitely take necessary measures to protect our rights.”

He was of course referring to proposals drawn up by U.S. Commerce Secretary Wilbur Ross, who last week recommended Trump should impose tariffs on foreign suppliers of metals due to ‘national security’ issues, as well as unfair trade practices including steel ‘dumping’. Dumping is the process of keeping steel prices artificially low, which has the effect of pricing other producers out of the market. Republicans in Washington argue that this practice negatively impacts the ability of U.S. steel companies to compete, thus hitting communities in America which have depended strongly on manufacturing jobs, and have been decimated by the closure of factories, particularly across the rustbelt.

Trump’s more protectionist rhetoric on trade and his skepticism of globalisation resonated strongly with voters in these communities in 2016, yet this is an age-old problem that was a hot topic even under Obama. Even notoriously anti-Trump news outlet CNN formerly sympathized with his perspective. In a report in 2016, CNN said that the American steel industry was “being hurt by an unprecedented surge in unfairly traded imports, with record amounts of foreign-produced steel flooding into the United States. Cheap, subsidized foreign imports are taking steel jobs away.”

Whether these tariffs are good for the American worker is yet to be seen, because this is only the second salvo to be fired in what could become a full blown trade war, but it’s fair to say the ramifications of this action from the Trump administration will be significant, given that China produces around half the world’s steel. Trump has until mid-April to decide on whether to go ahead with the proposals, which would mark the second major action on trade after he imposed tariffs on solar panels and washing machines from the Asian superpower in January.

The move won’t be a surprise given the rhetoric Trump used during the campaign and in his first year in office. He’s set his sights on renegotiating everything from how much NATO members spend on their military budgets to coming down hard on Canada’s lumber industry, whereby the Department of Commerce set total import tariffs at above 20 per cent for most Canadian softwood lumber producers last November.

China’s Ministry of Commerce soon went on the defensive, and said the conclusions from a US departmental national security review of the steel and aluminium industries were incorrect, because China has proven its products did not threaten U.S. national security. Wang Hejun said: “The spectrum of national security is very broad. Without a clear definition, it could easily be abused. If every country followed the U.S. on this, it would have serious ramifications on the international trade order.”

Related: The American oil industry is booming and that may undermine OPEC

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ALL RIGHTS RESERVED © INVSTR LTD. 2018

Risk Disclosure:
Invstr is a technology platform, not a registered broker-dealer or investment adviser. Invstr does not offer its own recommendations of any security or provide its own research to any user regarding any security transaction or order.
Please note, investing involves risk and investments may lose value. Past performance does not guarantee future results.
Brokerage services are provided by the following:
US-traded securities, including fractional trading, are provided to Invstr users by DriveWealth LLC, a regulated member of FINRA/SIPC. DriveWealth may not establish investment accounts to residents of certain jurisdictions. For more information, including disclaimers, risk and transaction fees click here.
India account traded securities are provided by SIC Stocks & Services PVT Ltd. SIC does not make any personal recommendations to buy, sell or otherwise deal in investments. Investors make their own investment decisions. The services and securities provided by SIC may not be suitable for all customers and, if you have any doubts, you should seek advice from an independent financial adviser. For more information and disclaimers, click here.

 

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