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Steel tariff: Is a trade war imminent?

President Trump’s affinity towards the American steel industry is evident from the promise he made during the 2016 election. In a sense, the tariff imposed on steel imports is the delayed fulfillment of that promise. Moreover, the White House has several reasons to come up with measures to boost the sector, and the close ties between its trade advisors and leading steel producers is just one of them.

Though Obama had taken a similar decision during his term, with softer terms, the decision by the present government has divided the House itself, besides pitting supporters of free trade against the protectionists. It is not known to many that certain provisions of the trade law allow the government to regulate imports in the interest of domestic producers and to protect national security.

Picture Courtesy: Darrin Aldridge

It is widely apprehended that leading steel exporters like Canada and EU countries would follow suit by coming up with similar measures, igniting a trade war that could upset the global economy. Amidst widespread criticism, Trump in a Twitter message said that the US was losing billions of dollars on trade and would find a ‘trade war easy to win.’

But, his onslaught on overseas trading partners (read China) came with a price – it triggered another stock market sell-off that saw the Dow shedding about 500 points soon after the announcement. The order imposing 25% tariff on import of steel and 10% on aluminum is expected to be signed this week.

“We’ll be signing it next week. And you’ll have protection for a long time in a while,” Trump reportedly told a group of steel and aluminum executives at a meeting held at the White House the other day.

It is apprehended that steel exporters like Canada and EU countries would come up with similar measures

So, are the Chinese baffled by Trump’s protective stance? Experts are of the view that China’s exposure to the US steel market is too small to have any noticeable impact. Rather, the Asian country is more concerned about its effect on the global recovery, and ruled out a trade war with the U.S.

China has long been earning the ire of local steel producers for dumping cheap steel in the US market.

China’s dominance in the steel sector is such that it is blamed for the oversupply of the metal in the global market. It is likely that the ripples of Trump’s measures would soon reach the shore of China, which is already on a drive to reduce overcapacity in its steel plants.

It is to be noted that Canada and Brazil, who enjoy cordial trade relations with the US, have also come at the receiving end of Trump’s decision.

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