Global Geopolitical Series: Knock on effect of U.S. metal tariffs to hit China harder

Knock-on effect of U.S. metal imports likely to hit China harder than its direct impact. Earlier this year, President Trump, based on the findings of national security investigations conducted by the U.S. Commerce Department announced that the United States would impose 25 percent tariff on all Steel imports and 10 percent tariffs on Aluminum imports.

While the United States only imports 2 percent steel directly from China, the latter is the single biggest surplus Steel producer in the world. According to data from World Steel Association, the global production of Steel was at 1.69 billion tons. China produced around 832 million tons; which almost half of the global production and enjoys a surplus production of almost 100 million tons. Compared to China, the U.S. produces about 10 percent of total Chinese production.

In response to the several countries have launched investigations to determine whether U.S. tariffs would divert surplus steel to their countries. The European Union has been at the forefront of these investigations, http://trade.ec.europa.eu/doclib/press/index.cfm?id=1823 The Canada has also announced that it is planning quotas and tariffs to prevent flood of imports in response to the U.S. duties, https://www.theglobeandmail.com/business/article-canada-preparing-steel-quotas-tariffs-to-prevent-flood-of-imports-in/

The situation is heading in a direction, where Chinese firms would have to drastically reduce their surplus capacity and that is not going to be good for the economy nor for employment in the Steel industry.