19 April 2019
Donald Trump's planned tariffs on steel and aluminum won't affect China as much as it does other major trading partners of the US. Photo: Reuters
Donald Trump's planned tariffs on steel and aluminum won't affect China as much as it does other major trading partners of the US. Photo: Reuters

Why Trump’s tariff move may actually benefit China

Despite the noises from Beijing, China may actually end up a big winner due to US President Donald Trump’s plan to impose 25 percent tariff on steel and 10 percent tariff on aluminum imports.

For starters, China won’t be that affected by the duties.

China is only the 11th-largest steel exporter to the US, accounting for just 2 percent of total US imports last year. China exported a total of 26.9 million metric tons of steel to US market during the first three quarters of last year, according to US government data.

By contrast, Canada, Brazil and South Korea are the top three steel exporters to US, representing 16 percent, 13 percent and 10 percent of total US steel imports respectively.

Although China is the second largest aluminum exporter to US, it accounts for less than 10 percent of US aluminum imports, trailing far behind Canada’s 41 percent share.

China is often seen as a threat to its global rivals due to its massive production capacity, cheap costs and alleged government subsidies. As such, China’s stainless steel, cold-rolled steel exports to the US are already subject to over 200 percent punitive duties.

The across-the-board tariff on other countries might actually make Chinese exports relatively more competitive.

Trump has decided to levy tariffs on steel and aluminum imports on grounds of national security. The US government believes steel and aluminum are strategically-sensitive materials and that the country should not fully depend on trade partners.

If domestic manufacturers are left to gradually fade out of the game due to cost reasons, and somehow the US cannot purchase these materials from overseas, the American economy may be paralyzed.

If there is a war, it could mean the US may not be able to manufacture aircraft carriers and fighter aircraft.

That is why the Trump administration is determined to shore up the two sectors and provide shelter for domestic manufacturers.

But the move may harm US auto, airline, construction, manufacturing and other sectors by raising their costs, threatening the jobs of hundreds of thousands of workers in these sectors.

Sweden’s Electrolux, Europe’s largest home appliance maker, has reportedly delayed a planned US$250 million investment in Tennessee after Trump’s tariff hike. The investment was expected to create over 3,000 jobs in the new plant in Tennessee.

Electrolux is concerned that “tariffs could cause a pretty significant increase in the price of steel on the US market.”

The tariffs on steel and aluminum imports may thwart Trump’s efforts to bring manufacturing jobs back to US. That would indirectly benefit China, which is the world’s factory.

This article appeared in the Hong Kong Economic Journal on Mar 5

Translation by Julie Zhu

[Chinese version 中文版]

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Hong Kong Economic Journal columnist

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