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Trade

US may impose tariffs on Chinese steel and aluminium imports amid ‘limited’ progress in trade talks

The Trump administration is dissatisfied with the results of ongoing trade negotiations with China, according to observers

PUBLISHED : Tuesday, 18 July, 2017, 8:18am
UPDATED : Tuesday, 18 July, 2017, 11:21pm

The US could impose quotas and tariffs to further block Chinese steel and aluminium imports into the American market, in a sign of the Trump administration’s dissatisfaction and impatience with limited progress in the sides’ ongoing trade talks, observers and specialists said.

US President Donald Trump labelled China’s steel and aluminium imports as “dumping” last Thursday during a flight from Washington to Paris. Trump said: “They’re dumping steel and destroying our steel industry, they’ve been doing it for decades, and I’m stopping it. It’ll stop…There are two ways - quotas and tariffs. Maybe I’ll do both.”

Trump’s comment came as China and the US are set to wrap up their 100-day negotiations aimed at addressing bilateral trade disputes and market access issues in a high-level economic dialogue on Wednesday in Washington. China’s overcapacity issues, including steel and aluminium exports, are expected to be on the negotiation table.

The two nations agreed on an initial outcome in May, allowing exports of some American products such as beef and natural gas, and certain financial services, to expand in the Chinese market. After that, progress has been slow in filling in a bilateral trade deficit of about US$340 billion.

“On the economic side [of negotiations], there is progress, but very limited,” said Scott Kennedy, a China specialist at the Centre for Strategic and International Studies. “The Trump administration becomes dissatisfied and lost a little bit of patience with China on some of these things.”

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In the White House’s policy stockpile, the US Commerce Department has been conducting an investigation into the impact on national security of foreign imports of steel and aluminium since March. US Commerce Secretary Wilbur Ross is expected as early as this week to give Trump a “menu of options” for restricting steel imports to protect national security, Politico reported.

“China is probably a target of this [investigation], to some extent,” added Scott Kennedy. “We know that there is possibility of some type of action [by the Trump administration] related to steel and aluminium.”

According to data released in March by the US Commerce Department, China is not among the top 10 sources of foreign steel imports into the US. “There are already lots of anti-dumping orders and countervailing duty orders in place that have already constrained American imports from China in these areas,” Kennedy said.

However, Politico reported the White House “may be thinking about closing America’s market to Chinese steel and aluminium.” Trump’s former trade policy adviser Dan DiMicco, a critic of China’s trade practices, said in an interview: “China must stop exporting steel. Only produce what their home market can consume. Nothing less is satisfactory.”

But American-based automobile companies are concerned that possible tariffs on foreign steel products would raise production costs. Ken Hopkins, CEO of Neapco, an automobile driveline assembly company based in the Detroit area, told the South China Morning Post in an interview in late June: “We know it will affect our cost.”

Neapco imports and buys aluminium or steel tubing from overseas and American suppliers. “Our largest supplier is overseas and [our] second supplier is American. It’s a combination. For this [production line], we probably have 40 to 50 suppliers, everything from little snappers or screws to long tubes,” Hopkins said.

China will be the clear winner if Trump declares a trade war

“I’m not going to state whether Mr Trump is good or bad, as long as they are applied equally and fairly, then that’s what competition is about,” he said. “I’m a free trade proponent, to have free trade and open borders and open movements of goods and services is good for the world.”

Kennedy said he doubted the commercial effect of tariffs would be high. “It’s obviously symbolically large because it’s a big change from the tone of the official engagement over the last two and half months,” he said. “So it’s just maybe a wake-up call that the US would like to see even more momentum in the relationship that has already been generated from Mar-a-Lago (Trump’s Florida estate and base).”

On June 26, in a White House meeting with more than 20 top officials present, Trump and a small group of America First advisers made it clear they’re hell-bent on imposing tariffs — potentially in the 20 per cent range — on steel, and likely other imports, Axios reported.

In the meeting, US Commerce Secretary Ross pushed a plan, backed by chief strategist Steve Bannon, trade policy director Peter Navarro and senior policy adviser Stephen Miller, for the US to impose tariffs on China and other big exporters of steel, according to Axios.

The Axios’ report said the tariffs could eventually extend to other imports. Among those that may be considered: aluminum, semiconductors, paper, and appliances like washing machines.