Steel and Aluminum: The New Hot Fronts in the Trade War Between the US and China

A New Chapter in the US-China Trade War

A new chapter has opened in the commercial war between the United States and China.
The Biden administration has requested a tripling of the existing tariff rate on Chinese steel and aluminum, just as the US Trade Representative’s office (USTR) has announced the initiation of another investigation under Section 301 of the Trade Act on the maritime, logistics, and shipbuilding sectors made in China.

Biden’s Move

According to a White House statement, Joe Biden has asked the USTR to increase tariffs on steel and aluminum exports from beyond the Wall from 7.5% to 22.5%.
He has also invited some representatives to pressure Mexico to prevent the transfer of these two mentioned products through its territory to evade tariffs.

The Political Aspect

The move by the US president has a clear political flavor, as it came just before a visit to the headquarters of the United Steelworkers Union in Pittsburgh, amidst the ongoing electoral campaign in the showdown that will pit Biden against Donald Trump next November.
Nonetheless, the new investigation was launched after a “serious and concerning” petition submitted by five national unions accusing China of using “unfair and non-market policies and practices” to “dominate the maritime, logistics, and shipbuilding sectors,” in the words of the USTR.

Response from China

It is likely that the Asian giant will react to any higher US tariffs.
“The extent of China’s response will depend on the impact of the latest US investigations.
Even though the move was driven by the elections, China will not take that into account when formulating a response,” stated Lu Xiang, a senior researcher at the Chinese Academy of Social Sciences, to the South China Morning Post.

The US-China Trade Front

It is important to note that China’s share of US imports of steel and aluminum is relatively small.
Therefore, even if new duties were to effectively close the US market to these sectors, the overall impact on trade between the United States and China would be limited.
However, there is a risk of a possible sino-American escalation.
Biden’s move could mark the beginning of a new cycle of reciprocal trade retaliations.

Global Implications

At present, South Korea, Vietnam, the Philippines, and Thailand are among the main markets for Chinese steel exports.
Concerning this, the government of Thailand – the fourth-largest destination for Chinese steel exports in 2022 based on US data – initiated an investigation in 2023 on rolled steel made in China for possible anti-dumping measures evasion after a complaint from national steel producers.

The European Union has also launched anti-subsidy investigations against Chinese producers – especially those manufacturing electric vehicles – citing the same concerns about overcapacity.
The risk of witnessing a new phase of the Trade War 3.0 between the US and China is highly likely.