How China Skirts Americas Steel Tariffs
Three years ago, a steel mill in Serbia appeared headed for the scrap heap. It was hemorrhaging cash after the Serbian government stopped subsidizing it following six straight years of losses.
Today, production has hit all-time highs under its new owner, a Chinese state-owned steel producer. Exports from the plant have surged, including shipments to the United States.
The development is part of a strategic shift from China. For the past several years, the country’s state-backed manufacturers have been shutting production at home and expanding overseas, fueled by tens of billions of dollars from Chinese state-owned lenders and funds. Chinese steel companies have signed agreements to build plants in Malaysia, Pakistan, India and elsewhere.
In northern Brazil, a Chinese consortium is expected to break ground later this year on an $8 billion project to build one of the world’s biggest steel plants, expanding Brazil’s potential steel output even though the industry there operates at less than 70 percent of capacity.
By owning production abroad, Chinese steelmakers aim to gain largely unfettered access to global markets. Their factories back in China are constrained by steep tariffs imposed by the U.S. and other countries—much of which was in effect before the Trump administration—to stop Chinese steelmakers from dumping excess production onto world markets. Factories outside China, however, face few so-called antidumping tariffs.
The Trump administration in March jolted the global trading system by imposing additional tariffs of 25 percent on all imported steel and 10 percent on aluminum, a move aimed at ratcheting up pressure on China to shut domestic steel and aluminum plants. Those tariffs have since been extended to Canada, Mexico and the European Union.
Even though the new U.S. tariffs apply to Chinese steelmakers that moved production abroad, the Trump tariff rate is much lower outside China than on steel produced inside China.
Source: Wall Street Journal