The Trade Wars Begin: U.S. Imposes 256% Tarriff On Chinese Steel Imports

Tyler Durden's picture

Two weeks ago, when looking at the latest import price index data, we showed something disturbing: China has become an all out exporter of deflation. As the chart below shows, In November, import prices from China decreased 1.5% over the past 12 months, the largest year-over-year drop since the index declined 1.7% for the year ended in January 2010.


Howdid this happen? As we explained, with all of its domestic markets fully saturated, China has had no choice but to export its soaring commodity production as we explained in "Behold The Deflationary Wave: How China Is Flooding The World With Its Unwanted Commodities." 

As we noted then, shipments of steel, oil products and aluminum are reaching for new highs, according to trade data from the General Administration of Customs.  That’s because mills, smelters and refiners are producing more than they need amid slowing domestic demand, and shipping the excess overseas.


Logically, the less domestic demand for steel, and the greater China's steel exports, the lower the price continues to tumble, now at a 10 year low.

because mills, smelters and refiners are producing more than they need
amid slowing domestic demand, and shipping the excess overseas. 

The flood of Chinese supplies is roiling manufacturers around the world and exacerbating trade frictions. The steel market is being overwhelmed with metal from China’s government-owned and state-supported producers, a collection of industry associations have said. The nine groups, including Eurofer and the American Iron and Steel Institute, said there is almost 700 million tons of excess capacity around the world, with the Asian nation contributing as much as 425 million tons.

According to Macquarie's Colin Hamilton, head of commodities research, it is about to get even worse: the price of hot-rolled coil, used in everything from fridges to freight containers, may decline about 13 percent next year. The nation’s steel exports, which have ballooned to more than 100 million metric tons this year, may stay at those levels for the rest of the decade as infrastructure and construction demand continues to falter.

A worker walks on stacks of steel pipes at a storage yard in Shanghai.

China's metals industry is facing the same problem that OPEC has had to deal with over the past year: a huge supply glut faced with declining global demand, only unlike OPEC there is no "efficient, rational" producer cartel that can (or in the case of OPEC could) implement production limits.

While falling steel prices are partly driven by the collapse in raw materials and lower output costs, “it’s just more to do with the fact the industry was built for demand growth that hasn’t come through,” Hamilton said last week. “We’re past peak steel demand. I think provided there is overcapacity in the Chinese system and given where demand is, it’s going to be like this for some time.”

Well, maybe not: there is one thing that could dramatically slow down China's metal exports - tariffs, anti-dumping duties and other forms of protectionism.

“What may slow down the exports is anti-dumping and protectionist measures that several countries have taken against cheap imports,” said Ernst & Young’s Agrawal. “We’re going to see an impact. More and more countries are raising their objections.”

In other words, a trade war.

To be sure India has already done just that:

India plans to step up its protection for debt-laden domestic steelmakers by imposing a minimum price on steel imports among other measures, Steel Secretary Aruna Sundararajan said in an interview this week. The import curbs are necessary to ensure a “level-playing field” for Indian companies after restrictions imposed in September failed to stop a decline in prices, she said.

And now it's America's turn.

According to a report released Tuesday by the US Department Of Commerce, corrosion-resistant steel imports from China were sold at unfairly low prices and will be taxed at 256 percent.

The measure is clearly aimed exclusively at China's dumping of steel on the US market, and its relentess exports of deflation.

According to Bloomberg, imports from India, South Korea and Italy will be taxed at lower rates. Imports from Taiwan and Italy’s Marcegaglia SpA will not face anti-dumping tariffs. The government found dumping margins of 3.25 percent for most South Korean steel imports, with Hyundai Steel Co.’s shipments subject to duties of 3.5 percent. Imports from Italian companies excluding Marcegaglia will be taxed at 3.1 percent. Indian imports are subject to duties from 6.6 percent to 6.9 percent.

Which means that the biggest "beneficiary" of this dramatic import price surge will be none other than Beijing.

“We’re concerned that the dumping that’s occurring is at higher levels than these determinations reflect,” Tim Brightbill, a partner at Wiley Rein LLP, a law firm representing U.S. steelmaker Nucor Corp., said Tuesday in an interview. “We have serious concerns that these preliminary duties are not enough at a time when unfairly priced imports continue to surge into the U.S. market at unprecedented rates.”

According to some the US foray into trade wars was long overdue:

U.S. producers including Nucor, U.S. Steel Corp. and Steel Dynamics Inc. filed cases in June alleging that some products from China, India, Italy, South Korea and Taiwan had been dumped in the U.S., harming domestic companies. In November, the government found that all those countries, except Taiwan, subsidized their domestic production by as much as 236 percent of its price.

The tarfiff hike comes on the heels of a previous announcement from November 3, which saw countervailing duties as high as 236%. Together these create a barrier to imports of these steel products from China, said Caitlin Webber, an analyst at Bloomberg Intelligence in Washington.

“A 500 percent duty is obviously prohibitive,” Webber said in an interview. “The lower ones are much less prohibitive and would probably have a lower impact on imports.

This means that suddenly China's steel exporters will have to scramble to find a comparably large market  in which to sell their wares as now exporting to the US is prohibitively expensive and would result in massive losses to domestic producers.

According to Bloomberg calls to the spokesman’s office at China’s Ministry of Commerce in Beijing weren’t answered. An official who answered a call to the China Iron & Steel Association couldn’t immediately comment. Not like they would have much to say.

The problem for China is that as we have explained previously, unless local commodity producers can keep generating some cash flow, even if it is negligible, China will be swept in a default wave that will sweep away all the overlevered producers of steel and other commodities, leading to social unrest or worse.  We already know that at current prices more than half of China's commodity producers can't even make one coupon payment. What happens now when the rush to the bottom enters the final laps and the bottom falls out of prices?

Which also means that now that the US has fired the first trade war shot, it will be up to China to retaliate. It will do so either by further devaluing its currency or by reciprocating with its own protectionist measures against the US, or perhaps by accelerating the selling of US Treasurys. To be sure, it has several choices, clearly none of which are optimal from a game theory perspective, but now that the US has openly "defected" from the "prisoner's dilemma" game, all bets are off.

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Dragon HAwk's picture

Dumping or Price Discovery.. you decide

Latina Lover's picture

China is so over supplied with raw materials,  and credit is becoming so tight that steel sales  are going no bid.


Vampyroteuthis infernalis's picture

Day late dollar short! The industry will die now. Instead of proper tariffs and dealing with suppliers like China as our leaders should have, the price bust will wipe everyone off the map. Is it me, or does the US lack any leaders these days? Morons!!

The Juggernaut's picture

When is ZH going to blow the lid off on how USA/CIA inlfated the Azerbaijani currency for working with Russia?  Who's the global terrorist?

y3maxx's picture

USSA vs Russia & China.

Shows how desperate the USSA's protection of the petrodollar has become.

Free trade is dead...Expect Protectionism to continue followed w/ WW #3 

Chupacabra-322's picture

"Currency wars, trade wars, world wars"
-Gerald Celente

847328_3527's picture

How about protecting America's middle class, Barry, and passing a 25% tax on the flood on money laundered in the United States by foreigners, including the Chinese? Too bad the DroneMaster is the NAR's bitch.

GeezerGeek's picture

"We don't need no stinkin' middle class." - Barry
All part of the fundamental transformation of the USA.

Barnaby's picture

Look up the word "fundament" and there you go. Right up the butt.

jcaz's picture

Way to go, 30 years too late- typical.....

Mountainview's picture

30 years from now -the day China and Saudi won't accept USD for payment- trade war will really start.

Richard Chesler's picture

"chinese steel"

Shit they make is anything but steel.


Vendetta's picture

yeah, like the current paradigm of trade policy will last that long, it barely hold on now.  Thus the difficulty the globalists have in getting countries to get on board with their bs trade policy objectives.

kralizec's picture

Did you forget how this Obamunism really works?

Antifaschistische's picture

how about the US dumping treasury debt onto the world debt market.  Maybe people across the oceans will finally get fed up with that and start taxing it.

lincolnsteffens's picture

First, currency wars.   Check

Second, trade wars.  Check

Third, hot wars.  half a Check

Why does the main stream media in the US only focus on declining economies in other nations while still touting the weak recovery is caused by the slowdown abroad?? Never a word about how the US consumer had reached peak credit ten years ago and slowed purchases of goods made in other countries.

Slightly off topic--Local NPR station owner was saying how north east heat wave is alarming and shows how ridiculous global warming deniers are. I suppose in his statist sycophant rant he forgot to check on the rapidly expanding ice cap to the north and a local report of -51 degrees in Colorado yesterday. I'm beginning to think he knows he is spouting propaganda and finds it good for his bottom line in raising funds for his network of stations.

Save_America1st's picture

yes, the NPR fuck knows it's a scam.  NPR = National Propagandist Radio.  NPR receives hundreds of millions in tax payer dollars directly from the Gov-Scum every year, so of course those assholes are going to say whatever they're told to say to the sheeple. 

Don't donate to NPR...they're already highly subsidized as I said above.  Everything else the sheep-tards willingly donate to NPR is probably used as a slush fund for child sacrifice parties.  (and I'm not even really sure if I'm joking about that last part or not) ;-)


NidStyles's picture

What's that red stuff around your lips Rabbi?

FireBrander's picture

The USA produces FAR better steal than China. Micro steel mills are HIGHTLY competitive, but CANNOT compete against GROSS enviromental and worker disregard.

This tarriff will be messy, but it's a push in the right direction.

The whole "Global Economy" meme is bullshit and has run it's course...time to "Make America First"..and with that I throw my hat into the presidential ring!

Please send donations to:


FireBrander's picture

< Genuine

< TOTALLY Scripted

Vote on Hillary's "touching moment" with that little girl that was bullied.

I say scripted...little girl was genuine, but Hillary is a fake and shameless; using a little girls pain for political gain.

yogibear's picture

Hillary is a corrrupted lush.

Not to long ago had a drinking problem, but is still a liar and unethical.

What happened to Vince Foster? This bitch would put a dagger in your back if she could get more power.

A Nanny Moose's picture

Unfortunately, protectionism has exactly the opposite effect. Rather than protecting national industries, it kills them. How is that US sugar industry doing?

This is just moar fascism 101.

FireBrander's picture

"protectionism" occurs when you go too far; correcting one-sided trade deals is not protectionism.

If ANY barriers to foreign products is "protectionism"; then fuck it...we're finished...just put everyone on welfare and let's get this shit show on the road.

NidStyles's picture

Welfare during times like that means being consripted. 

eftian's picture


"The USA produces FAR better steal than China."


steal lol


Beautiful Freaudian slip..

fockewulf190's picture

More goast cities and Treasury Bond redemptions to pay for it all.  Either that, or the unemployed natives go wild. 

Abbie Normal's picture

What exactly is a goast?  Perhaps the undead spirit of a goat?

Demdere's picture

Our leaders shouldn't have any gd thing to do with the economy, period. All of the many things that people have thought of for the gov to do to help the economy is how we got here.

You act as if it is just obvious what to do, how could we doubt it?

Tell you what : if it is so obvious to you, bet. If you know the future well enough to write an intelligent policy, you know enough to predict the future.  I will be pleased to help you monitize your insight, should it not be clear to you.  If you can predict any small element of the future consistently, there is a futures market that we can do well in.

Well, used to be, but you got the point?

It is real easy to tear off a 'solution', not so hard to convince a lot of people that is IT.  But so far, nobody has found a solution to the problem of managing an economy.  Governments who try to do that fail in proportion to the size and duration of their efforts, from my reading of history.

As we are learning yet again.  Believe traders when they tell you about the market, but never mere advisors.  Dime a dozen and all so persuasive.  Otherwise they wouldn't be advisors, would have to lay bricks or something real.

VinceFostersGhost's picture



Don't you have to have a manufacturing sector to need steel?

kralizec's picture

Yes, fortunately for the supplier, those factories are also in China.

Rainman's picture

Here's 3 major USSA bridge projects totalling $8 billion awarded to the ChiComs


Demdere's picture

Recycling the WTC steel.  Greens applaud!

TemporarySecurity's picture

Thankfully America kept GM and Dodge alive with our money so they would not go out of business and keep the jobs in Amerika.



GeezerGeek's picture

Dodge was German before it became Italian. I put a tri-star emblem over the pentastar on my old Intrepid and tried convincing my wife we owned a Mercedes. Later I painted it red and put on a prancing horse emblem. I always wanted a Ferrari. (Actually it was a Mustang emblem rotated to make it look like a prancing horse; a real Ferrari emblem could not be cost-justified.)
I used to buy Plymouths before I was forced to switch to a Dodge. Most all of them said "Made in Canada". Well, it is part of America, if not Amerika proper.

lincolnsteffens's picture

Yes, I have a Chrysler but it is all Mercedes underneath.

Raging Debate's picture

My Mercedes is a glorified Chrysler. Same front end problems in it too. 

General Decline's picture

"corrosion-resistant steel"     -    Based on this, I'm assuming it has more to do with finished products reather than raw steel used in manufacturing..  Like the electrical thin-wall conduit as pictured in the article.  But don't you have to have a building industry to need conduit?

Takeaction2's picture

@Vince......  Thank You for that incredible comment.  +1

Angel_Eyes's picture

I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do...

plane jain's picture

I wish someone would cut the cord on this 'bot.

sschu's picture

China is dumping right now and the world knows this.  Will other countries move to protect their domestic manufacturing base against mercantilist policies?

Now is the time, Harbor Frieght was humming the other day, you can buy Chinese stuff at 20% below other suppliers ... for a while at least.


Sonic the porcupine's picture

Price controls don't lead to prosperity.

sschu's picture

Price controls don't lead to prosperity.

But they often lead to war or political unrest.  Such is the devil's deal we have entered into with the idea of fiat currency and central banks.

What is the response the USA should have against the mercantilism of China?

The answer is not get to there in the first place, but that decision has already been made.  What do we do now?  


KnuckleDragger-X's picture

Nothing like a world-wide economic gunfight to make things interesting. Nothing anybody can do to make things better, but there's a lot of things they can do to make things worse, and in this case, much worse....

MrNosey's picture
Currency Wars = Trade Wars = World Wars

There will be a rush for the exit in the new year as it has just been discovered that the German Chancellor Angela Merkel is allegedly ‘Hitler’s Daughter’ and therefore we will witness the rise of the 4th Reich......


---------'s picture

MrNosey = Moongod = Happymeal

there will be a flush of idiots coming to zero hedge beacause in the new year 2016, all of the paranoics and schizophrenics form will be spamming their links and nonsese under every single of your comments twice......

Takeaction2's picture

So....your telling me we DO charge a tariff?  It must be .00000000001  per ton.  So now we charge  .0000000000256  WOW...this ought to bring all of the jobs back here.  Sounds to me that people that make decisions are listening to TRUMP.  In Costa Rica, the government puts a 100% tariff at wholesale on many imported items as WE SHOULD.  So for instance a Toyota that sells for $25,000 here in the USA, sells for $50,000 in Costa Rica.  It is that simple.  It is not fair to have all of this plastic crap from China made using labor that pays slave wages.  The plastic cup at Walmart that costs wholesale $1.00....fuck it 100%.  So now it is $2.00  wholesale cost....and then mark it up and sell it.  You want $15 an hour....then you need to understand this....Oh many dindos are on this site? ZERO   P.S.  Was just in Panera Bread in Miami and they were just installing 6 touch screen self service stations.  And I sat down at a restauraunt in New York Airport and had the ordering screen with the credit card reader right at my table.  It was a little clunky (The user interface was not really as friendly as I would expect..) getting my ordering in.....The tablet even took a photo of my face and printed on the ticket so the waitier knew which person to bring it to and what I looked like.  Service sector jobs will be vaporizing by the thousands.  If you have a kid in them to do something that will last.....Merry Christmas ZH