China demands metal tariff compensation from US, setting stage for WTO showdown

China’s filings to the World Trade Organisation accuse the US of using the tariffs as ‘safeguards’ to protect local producers, and not national security measures as Washington claims

PUBLISHED : Tuesday, 27 March, 2018, 8:55am
UPDATED : Tuesday, 27 March, 2018, 8:57am

China has asked the US to provide compensation for lost trade due to President Donald Trump’s proposed tariffs on steel and aluminium, in a preliminary step that could lead to a dispute between the two nations at the World Trade Organisation.

In two filings with the WTO on Monday, China dismissed the US assertion that the metal tariffs were instituted on national security grounds, arguing instead that they were safeguard measures – temporary trade restrictions aimed at protecting domestic producers.

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China responded to the US action by threatening to impose tariffs on US$3 billion of US imports – including agricultural, steel and aluminium products – and its ambassador to the US said all options are on the table, though Beijing doesn’t want a trade war. The levies are expected to affect US$689 million worth of Chinese steel and aluminium exports to the US, according to data published by the Peterson Institute for International Economics.

If the US rejects China’s argument that the measures are safeguards, China may have recourse to ask the WTO to mediate the disagreement in a formal dispute proceeding. China said it reserved the right to file a dispute at a later date, according to the filings.

Separately, the European Union took the first step toward protecting EU-based steel manufacturers on Monday when the European Commission opened a “safeguard” probe into whether the 25 per cent levy on foreign steel imposed last week by Trump is diverting worldwide shipments to the EU market.

The probe marks the defensive part of a three-pronged strategy that the EU has drawn up to respond to the US steel tariff and to a 10 per cent levy on foreign aluminium.