China Balks

Steel summit fails to reduce glut

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Handshakes but no deal at steel talks. Source: Reuters

China refused Thursday to take unilateral action to reduce the world’s steel glut, paving the way for US President Donald Trump to carry through with his threats to impose punitive tariffs on Chinese steel imports.

A conference of G20 steel producers in Berlin ended without any agreement on next steps, although German Economy Minister Brigitte Zypries said the states in attendance had agreed to cut subsidies to their domestic steel producers..

Beijing said it was in the middle of a major renovation of its steel industry with closure of more than a hundred steel plants, but it refused to agree to reduce its exports unless other countries also agreed.

“We feel that the forum has not made meaningful progress yet on the root causes of steel excess capacity.”

Jamieson Greer, US trade representative chief of staff

“We feel that the forum has not made meaningful progress yet on the root causes of steel excess capacity,” said Jamieson Greer, the chief of staff at the US trade representatives’ office. “Pointing to short-term developments and worn-out promises are not by themselves going to cure the fundamental causes of the problem.”

Mr. Greer called on China to take what he called “concrete policy steps,” including removing market-distorting subsidies and treating state-owned steelmakers the same as private companies.

China’s assistant commerce minister, Li Chenggang, noted that the steel market had improved this year as a result of the steps Beijing was taking. “The Chinese government has already announced a goal for 2020 – we will cut 100 to 150 million tons of steel capacity,” he said. He called on the gathered nations not to require only China to act.

But that was not sufficient to meet the Trump administration’s demands for immediate action. China is the world’s largest steel exporter, providing over half the world’s supply. The US is the world’s largest importer of steel and US steel firms have laid off hundreds of thousands of workers as a result of both imports and automation at steel producers.

The Organization of Economic Cooperation and Development estimates that the global steel business has 750 million tons of excess capacity.

Mr. Trump shocked the industry in April when he announced that he was invoking a 1962 trade law that gives the president broad authority to impose protective tariffs if he determines that the imports damage US national security.

Commerce Secretary Wilbur Ross is currently conducting a study of the impact of Chinese steel imports and will issue a report in January. Only two US presidents – Richard Nixon and Gerald Ford – have invoked the Trade Expansion Act’s powers to restrict imports on national security grounds. Both instances involved oil.

The US has already imposed punitive tariffs on a number of Chinese steel imports, but China’s industry is so huge that it dictates prices around the world. European nations are also concerned that their steel producers would be affected by US tariffs.

Charles Wallace is an editor for Handelsblatt Global in New York. To contact the author: c.wallace@extern.handelsblatt.com.

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