Other Nations Following US Lead on Steel Tariffs

July 19, 2018

When the Trump administration imposed 25% tariffs on steel imports in March this year, some other nations loudly criticized the move. Now, surprise, surprise, they are shifting gear—and jumping on the tariff bandwagon.

This week, both the European Union and Canada have taken steps towards blocking excessive imports of steel into their markets.

The European Union announced on Wednesday that it would levy a 25% tariff on all steel imports above the average level of steel imports between 2015 and 2017. The EU said this is necessary because steel imports into the EU, which rose by over 60% between 2013 and 2017, were set to rise further this year as the US tariffs take hold and steel from major exporters gets diverted into Europe. This, the EU said, could have negative consequences for EU steelmakers and their workforces (i.e. job loss).

Meanwhile, north of the border, Canada is also considering restrictions. When the Trump administration first raised the idea of a tariff on worldwide imports, including Canada, the Canadian government promised to clamp down on transshipment of Chinese steel in an effort to win an exclusion from the US tariff. It didn’t get that exclusion, and bitter talk followed from Canadian ministers, who play up their role as one of America’s strongest allies. But this week, according to press reports in Bloomberg News and elsewhere, the Canadian government said it’s considering import restrictions on three important steel products, energy tubulars, steel plate, and rebar. Those products are widely used in the oil and gas industry and construction. A Canadian minister said the government is eyeing these products as a “demonstration of our understanding” of what is going on in the markets. In other words, diversion of steel previously targeted for the US which is now reaching their shores.

The steel exporters that are most in the firing line for these import restrictions are China, Russia, and the Ukraine.

These moves by two large steel consumers (the 28-nation EU is the world’s largest steel importer, importing 40 million tons in 2016) fit in with what some informed sources say is the Trump administration’s master plan. This plan, which was hammered out before his inauguration, was to take aggressive action on US imports, thereby forcing other nations to feel the pain of increased imports, depressed steel prices, collapsing profits, and layoffs. Since back before 2017 those other nations flatly refused to take aggressive action on steel imports, only real pain would push them into stepping up, the Trump advisors calculated. The goal is to switch from talking about the China problem to doing something about it.

Trump’s justification for the Section 232 US steel tariffs is national security, and that argument stands on its own: the US military and civilian economies are not secure if they rely on imported steel for 20%-30% of their needs. However, the fundamental problem remains what it has been for years: the world has hundreds of millions of tons of steel overcapacity. China produces half the world’s steel, is the number one exporter, exporting more than double anyone else’s exports, and has failed repeatedly to live up to pledges to cut back on capacity.

Only a united front against China can produce some movement in Beijing. And that united front may now be forming.

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