US tariff-cut news less likely to have a significant impact on Chinese steel exports

U.S. President Joe Biden is considering whether to eliminate additional tariffs on Chinese goods imposed during Donald Trump's administration, in order to tackle the highest inflation that the country has experienced in 40 years, China's Xinhua News Agency reported on May 11.

Although Xinhua noted that no decision has been made yet, Chinese steel exporters were indifferent to the news, saying that most China-origin flat steel exports will still be hampered by Trump's hefty 25% import duty.

Data from the US Labor Department published showed that the rate of inflation for consumer prices declined fractionally last month to 8.3%, just below the 40-year high reached in March of 8.5%.

Nevertheless, the surge in the Consumer Price Index (CPI) has sounded an alarm in Washington and prompted the US government to explore tariff reduction as part of its measures to take the heat out of the CPI, Mysteel Global notes.

According to Washington-based think tank, the Peterson Institute for International Economics, tariff exclusions on Chinese products may be conducive to lowering inflation in the U.S. and would reduce the country's CPI by more than 0.3 percentage point, according to PIIE research Xinhua cites in the news report.

But Chinese steel-market sources told Mysteel Global that tariff reductions may not have any significant impact on China's steel exports, pointing out that only a few steel products could be exempt from the 25% tariffs imposed by the Trump administration in March 2018 under Section 232 of the US Trade Expansion Act.

Annual exports of Chinese finished steel to the U.S. have plunged to around 800,000 tonnes since 2019 from above 1 million tonnes before the Section 232 penalties were introduced, according to China's Customs statistics.

"The U.S. government may just drop or reduce the additional duties on those Chinese goods they need, such as raw materials for production of daily necessities," a steel trader in East China's Zhejiang observed.

"The impact on Chinese exports of hot-rolled and cold-rolled coil is likely to be limited," she told Mysteel Global, adding that her company's exports to the U.S. had been generally negligible over the past several years.

Back in March, the US Trade Representative's office announced that the US was reinstating import tariff exclusions on some 352 Chinese products.

Under Trump, tariffs had been imposed on a wide array of Chinese imports as Beijing-Washington trade relations deteriorated, though his administration later granted tariff exclusions to some 2,200 China-origin goods "to provide relief to certain industries and retailers," as reported.

However, no iron or steel products were on the USTR's list, Mysteel Global noted at the time.

Written by Anthea Shi, shihui@mysteel.com and Nancy Zheng, zhengmm@mysteel.com

Note: This article has been published in accordance with an article exchange agreement between MySteel Global and SteelMint.