China And U.S. Lock Horns Over New 122.5% Steel Tariff

Yves here. This is far from the most earthshaking story, but it illustrates the degree to which the US and China are engaged in all sorts of trade spats in addition to the high profile chip war, with the US attempting to restrict Chinese access to the highest-end versions. Without relitigating these policies, quite a few experts have described why the sanctions are likely to prove to be counterproductive.

It is over my pay grade to assess the merits of the US and Chinese claims. Note that China contends the tariffs are being applied in a discriminatory manner,  with US allies like Britain and the Netherlands being spared.  However, it was not all that long ago that the US was very hesitant to file WTO cases, even when the abuses seemed clear. But now that China is America’s favorite unfriendly power, those inhibitions are gone.

By MetalMiner, the largest metals-related media site in the US according to third party ranking sites. Cross posted from OilPrice

• The U.S. Department of Commerce levies a 122.5% tariff on Chinese tin plate steel imports, inciting criticism from China.
• While Germany and Canada face lower tariffs, five other countries, including Britain and South Korea, are exempt from these duties.
• The WTO backs the U.S. in a separate trade dispute, ruling China’s counter-tariffs on U.S. steel and aluminum as a violation of trade agreements.

The U.S. Department of Commerce recently decided to enforce preliminary anti-dumping duties on imports of tin mill and tin plate steel from China at a duty rate of 122.5%. As this is the highest preliminary rate, the move provoked severe criticism from trade analysts and experts across China.

This tariff also applies to China’s leading manufacturer, Baoshan Iron and Steel. In addition, the Department of Commerce plans to apply duties of 7.02% on tin mill imports originating from Germany and 5.29% on imports from Canadian producers. These moves will affect major products from each country, including companies like Thyssenkrupp and ArcelorMittal DOFASCO. However, the Department clarified that it would not be imposing anti-dumping duties on tin mill steel imports from Britain, the Netherlands, South Korea, Taiwan, and Turkey.

Tin mill steel is a lustrous silver metal extensively employed in crafting cans for food, paint, aerosols, and various other containers, with their specific price points being outlined on MetalMiner Insights. As a result, tin plate is central to many manufacturing processes.

China’s Response

Chinese analysts responded quickly to the move, criticizing the U.S. and labeling the new duty “unfair.” According to a report in the Global Times, analysts said the tariff rates imposed on Chinese imports were substantially higher than those on imports from Canada and Germany. In addition, they argue this could potentially violate World Trade Organization (WTO) regulations. Others stated that the actions taken by the U.S. government were both unilateral and protectionist.

The imposition of these fresh anti-dumping duties aimed to safeguard the United States’ domestic steel sector against cheap imports. Simultaneously, policymakers hoped the move would help level the playing field for U.S. producers. Indeed, proponents argue that the duties seek to counter the adverse effects of such “dumping” practices and support the local industry.

Explaining why the preliminary duty was the highest against China as compared to the other two nations, Reuters quoted a representative from the U.S. Commerce Department. They claimed that China’s higher rates resulted from a lack of cooperation from a major producer during the investigation, leading to an “adverse inference” determination. Other respondents also failed to demonstrate independence from the Chinese government.

Meanwhile, a Global Times report quoted Chen Jia, an independent analyst in global strategy, as saying the move went beyond the boundaries of competitive anti-dumping inquiries. According to Jia, the decision violated the WTO principles, including free trade, fair competition, and equitable negotiations. He further alleged that the steel and aluminum tariffs imposed by the U.S. represented a violation of global trade norms.

According to figures from the U.S. Commerce Department, China contributes about 14% of U.S. imports. Meanwhile, Canada and Germany together account for roughly 30%,

New WTO Order Against Earlier Chinese Tariffs on Metals

The latest trade spat near-coincided with a fresh WTO report detailing Chinese counter-tariffs against the U.S.’ Section 232 tariffs on steel and aluminum, favoring the U.S.

The WTO ruled that China’s imposition of tariffs on $2.4 billion worth of U.S. goods in response to former President Donald Trump’s steel and aluminum tariffs clearly violated its core trade agreements.

The World Trade Organization (WTO) is the only international organization that deals with the rules governing trade between countries. Its main function is to promote as much as possible the smooth running, predictability and freedom of trade.

Consisting of three experts, the WTO panel concurred with United States officials, who claimed that China’s tariffs ran afoul of the principle of most-favored-nation status. They also agreed that the move breached other trade concessions that China had agreed to upon joining the trade organization.

Soon after, China’s commerce ministry demanded that the U.S. immediately lift the tariffs imposed on Chinese steel and aluminum imports.

Genesis of New Duty, Impact on Tin Plate Products and Other Tin Imports

The fresh round of preliminary anti-dumping duties began in February this year following a petition from a lone U.S. steel manufacturer, Cleveland-Cliffs. The company alleged instances of foreign dumping within the tin-plate sector, a segment that saw the closure of numerous U.S. production facilities in recent years.

In June, the Commerce Department revealed preliminary anti-subsidy duties: a staggering 543% on tin mill imports from Baoshan Iron and Steel, and 89% on those sourced from other Chinese producers. This was part of a separate yet parallel inquiry. However, anti-subsidy examinations did not include the other nations mentioned in last week’s decision.

That same month, a bipartisan communication from members of Congress and trade body Can Manufacturers Institute highlighted how substantial anti-dumping duties would amplify expenses for canned packaging. They mentioned that this could potentially impact both food and aerosol products. This, they said, could potentially favor Chinese canned goods manufacturers and consequently increase imports of canned foods from China.

Canadian and German Tin Mill/Tin Plate at Risk

Indeed, the implemented duties announced are notably milder than initially feared. Institute President Robert Budway also expressed hope that the final decision by the Commerce Department would do away with the proposed duties on Canadian and German tin mill steel. Notably, the five countries exempted from duties account for approximately half of U.S. tin mill steel imports.

The decision regarding tariffs came out less than a week after Cleveland-Cliffs announced its intention to acquire a major competitor in the tin-plate sector: U.S. Steel. Industry experts pointed out that this move would accelerate consolidation within the American steel production landscape.