China’s steel industry body wants Beijing to get tougher with Trump over possible US import curbs

China’s steel industry association, which represents 80 per cent of the country’s steel production, has called on Beijing to get tougher with the administration of US President Donald Trump and to threaten retaliation if Washington moves to curb Chinese steel imports.

Li Xinchuang, vice-president of the China Iron and Steel Association, told the South China Morning Post in a telephone interview that China should be bold in protecting the interests of its own businesses and avoid “being led by the US by the nose”.

If Washington moves to levy additional tariffs on Chinese steel products or take restrictive measures against imports from China, China can “hit back on restricting [US] imports of automobiles and agricultural products”, Li said.

His comments came a day after the first China-US economic dialogue to be held since Donald Trump took power failed to reach an agreement on trade. One reason for the fruitless talks in Washington was that China refused to agree to US demands that it eliminate excess steel capacity, Reuters reported.

Li spoke from his position as a China steel industry representative.

There is only a small chance that a steel trade dispute between China and US would escalate into a full-fledged trade war. Steel is not a big item in the bilateral trade relationship, with annual turnover of US$520 billion, although it has become a talking point in economic ties between the world’s two largest economies.

Trump has long accused Chinese producers of stealing American jobs, a key point of his presidential campaign. “We’re going to use American steel,” Trump said in a Twitter posting back in April. On Wednesday, when asked if he would impose tariffs on steel imports, Trump said it “could happen”.

Li, who is also the president of the China Metallurgical Industry Planning and Research Institute, said Washington is adopting a steel trade policy of “discrimination” and “trade protectionism” while holding a “Cold War mindset” against Chinese products.

China produces more than half the world’s steel, but 90 per cent of that output is for its own domestic use. Chinese exports of steel products dropped 3.5 per cent in 2016 to 108 million tonnes, partly because of anti-dumping and countervailing investigations against Chinese steel products in importing countries.

The US imported 30.1 million tonnes of steel last year, but only 1.13 million tonnes, or 3.8 per cent, were actually from China. In steel exports to the US, China fell behind Canada, South Korea and Turkey, according to the US Department of Commerce. After more than a decade of steel-related trade disputes, steel shipments to the US accounted for just 1 per cent of China’s total steel exports last year.

Li said any new restrictions on Chinese steel products from the US will only hurt downstream American steel users. “[The] American steel industry has the highest salary… and product price is already among the highest worldwide. Haven’t you thought about the feelings of local users?” he said.

Although China exported only 10 per cent of its steel output, even that limited volume is bigger than the combined steel production of the US and Britain. China’s steel exports face restrictions not only from the US and Europe but also countries like Pakistan. Pakistan is to show such trade friction is frequent, even it is friendly with China.

Although China said it had shut down 65 million tonnes of capacity last year amid Beijing’s effort to curb pollution and reduce excess supply, its actual output of crude steel still climbed 1.2 per cent in 2016. In the first half of this year, Chinese crude steel output rose 4.6 per cent from a year earlier to 420 million tonnes, according to China’s National Bureau of Statistics.

China’s first-half exports of steel products by volume fell 28 per cent from a year earlier to 41 million tonnes, China’s customs data showed.