The US has once again placed tariffs on imported steel and aluminium, targeting a sector long dominated by China.
While China does not export large volumes of raw steel or aluminium directly to the US, its influence on global supply chains remains significant.
The 25% tariffs on steel and 10% on aluminium imports are expected to disrupt trade flows, particularly affecting American allies such as Canada, Mexico, and South Korea.
The real question is whether these measures will curb China’s indirect exports or merely shift global trade patterns.
This move reflects a broader strategy by the US to contain China’s economic influence, particularly in key industrial sectors. Beijing’s longstanding dominance in steel production has led to global oversupply, forcing competitors to lower prices.
While the Biden administration has largely continued Trump’s trade policies on metals, the latest tariffs signal a renewed effort to protect US manufacturers from what officials call unfair competition.
The effectiveness of these tariffs remains uncertain, as China’s supply chains have proven highly adaptable.
China’s role in global steel overcapacity
China produces over 50% of the world’s steel, with annual output exceeding 1 billion metric tonnes. However, a slowdown in its domestic economy has forced Chinese manufacturers to seek foreign markets for their surplus production.
While direct exports to the US are limited due to existing trade barriers, Chinese steel still enters the US through intermediary countries.
Nations such as Vietnam, Mexico, and Canada have been reprocessing Chinese steel before shipping it to the US, effectively bypassing restrictions.
The US steel industry argues that this indirect trade has eroded domestic prices and undermined American jobs. In 2023, the US imported 28.6 million metric tonnes of steel, with Canada, Mexico, and Brazil accounting for a large share.
By imposing tariffs on these nations, Washington hopes to close the loopholes that allow Chinese steel to penetrate the US market. However, these restrictions could also strain diplomatic ties with key trade partners.
Retaliation and global trade tensions
China has responded to the US tariffs with its own economic measures, imposing duties on US liquefied natural gas, coal, and agricultural machinery.
While Beijing has refrained from directly targeting US steel, it has increased domestic subsidies to offset the impact of Western trade restrictions.
Meanwhile, other major steel-producing nations, including Brazil, Turkey, and Indonesia, have also introduced countermeasures against China’s excess steel exports, suggesting a broader global backlash.
The European Union has similarly tightened its steel import policies, implementing carbon border adjustment measures that could further restrict Chinese exports.
These international actions reflect growing concern that China’s oversupply is distorting global markets, potentially leading to prolonged trade disputes.
Will tariffs strengthen US steel or escalate a trade war?
Historically, US steel tariffs have had mixed results. Trump’s 2018 tariffs led to short-term price increases, benefiting domestic producers but raising costs for industries reliant on imported steel, such as automotive and construction firms.
While US steel production has increased by 20% since 2018, capacity utilisation remains below the 80% level that industry leaders consider sustainable.
The current tariffs could help revive underutilised American steel mills, particularly in swing states such as Pennsylvania and Ohio, where the sector plays a crucial role in employment.
If global trade tensions escalate, US manufacturers may face retaliatory barriers in other key markets.
With global steel demand fluctuating and supply chains evolving, the long-term impact of these tariffs remains uncertain. While the US aims to reduce its dependence on foreign metals, the broader challenge of China’s dominance in global steel production is unlikely to be resolved through tariffs alone.
Instead, the ongoing trade conflict may further fragment global markets, reshaping supply chains rather than curbing China’s influence outright.
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