The Trade Wars Begin: China Retaliates To Steel Tariffs With Global Anti-Dumping Duties

Tyler Durden's picture

When looking back in history, December 23, 2015 may be the date the global trade wars officially began. On that day, as we reported at the time, the U.S. imposed a 256% tariff on Chinese steel imports.

It did so perhaps with good reason: with its local end markets mothballed, China was desperate to dump as much excess capacity as possible offshore with shipments of steel, oil products and aluminum all reaching new highs according to trade data from the General Administration of Customs, and the result was a dramatic drop in US prices.

On the other hand, with Chinese mills, smelters and refiners all producing far more than can be purchased domestically amid slowing domestic demand, as well as the government's anti-pollution crackdown, China's decision to ship the excess overseas was also understandable.

As Bloomberg wrote at the time, "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."

2016 was expected to get even worse: Colin Hamilton, head of commodities research, said the the price of hot-rolled coil, used in everything from fridges to freight containers, may decline about 13 percent next year. China’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.

To be sure, it was India who launched the first shot, when it announced that it 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 December. 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 then it was the US' turn, when shortly after India unleashed protectionist measures, the US Department Of Commerce announced that  corrosion-resistant steel imports from China were sold at unfairly low prices and will be taxed at 256 percent. The move was clearly aimed at China: imports from India, South Korea and Italy would be taxed at lower rates, while imports from Taiwan and Italy’s Marcegaglia SpA would not face anti-dumping tariffs.

We left it off by saying 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."

To be sure, just a few weeks later China proceeded with another dramatic devaluation of the Yuan, which may or may not have been accompanied by an aggressive selling of Treasury.

However the missing link was China unveiling its own protectionist response: a necessary and sufficient condition for fully symmetric trade wars.

It did so earlier today when, accused of flooding world markets with cheap steel, it imposed its own anti-dumping duties as high as 46.3% on electric steel products imported from Japan, South Korea and the European Union, the Ministry of Commerce said on Friday.

According to Reuters, the overseas suppliers include JFE Steel Corp, Nippon Steel and Sumitomo Metal Corp and POSCO, the ministry said in a notice posted on its website ( The ministry did not identify any EU supplier.

What is curious is that China, by far the world's biggest steel producer, imports relatively small quantities of high-end steel products, including electric steel used in power transformers and generators. In other words the move was mostly symbolic, and a confirmation that China now believes it is being treated unfairly enough to where it can demand in-kind protectionism which will only escalate as the end demand to the global supply glut is simply not there.

The tariffs come at a time when the UK is up in arms over the decision by Tata Steel, the owner of much of UK's steel industry, to sell its local plants in the process liquidating about 15,000 jobs. Tata blamed a flood of cheap Chinese supplies which means now that China has re-escalaed, thousands of newly laid off ironworkers in the UK (and elsewhere) will have a new global target which to blame for their troubles.

We doubt it will end there, because one trade wars begin, the logical consequences of currency wars, they rarely end amicably or on short notice, and on numerous occasions devolve into outright, conventional wars.

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0b1knob's picture

< I would prefer trade war to real war. 

< I would prefer real war.

AustrianJim's picture

Actually, trade wars lead to real wars.


"When goods don't cross borders, soldiers will”


Attributed to Frederic Bastiat.

pods's picture

China might want to look import some cement too.

KnuckleDragger-X's picture

China has been pushing their luck the last couple of years, and their power games at sea might push a hot war if they aren't careful........

edotabin's picture

It's the 80s all over again !  Cue up Rocky XXVIII

TradingIsLifeBrah's picture
TradingIsLifeBrah (not verified) Apr 1, 2016 2:49 PM

"Hey China, stop selling us your cheap stuff! We want higher prices" :/

popeye's picture

Its just supply & demand, "free market" for those that remember them. It isn't "China" deciding to export a whole lot of steel. Its a bunch of steel manufacturers who were encouraged to boost productive capacity via high domestic demand and easy credit discovering domestic demand has fallen off a cliff. Obvious solution: tap export markets. And if the capital & overhead costs are already sunk, then sell at anything above the direct cost of production.


It happens regularly where I live - small domestic population, so domestic demand is easily overwhelmed, hence a motive to export. "Oh, we are so small and the world is so big, we can't over-produce". Stupidity. Chinese steel production is the same scenario writ large.

skinwalker's picture

I used to go to China several times a year. I haven't been in a couple years, but I can't imagine it's improved. 


If steel stored better I'd stock up on some angle iron and a small welding rig, but alas. Rust.

KnuckleDragger-X's picture

I bought a used 40 foot container to store wood and steel, and they are going cheap now.......

willwork4food's picture

I used to watch Mad Money several times a year. I haven't been in a couple years but I can't imagine it's imporved.

Stocked up on Bear Sterns hoping I could retire, but alas. Bust.

InflammatoryResponse's picture

spray it with WD40 or BOESHIELD.  no rust.


Curiously_Crazy's picture

The article says the tariff was on "corrosion resistant still" which I assumed was just a trendy new term for stainless steel.. buggered if I know though.

debtor of last resort's picture

The more China devalues, the more trade tariffs, the more treasuries dumped, the more China devalues. Maybe they'll skip the conventional thingy.

Theonewhoknows's picture
Theonewhoknows (not verified) Apr 1, 2016 3:26 PM

Effects? Steel - among other commodities the cheapest since 1974 

AbbeBrel's picture

Looks like the trade wars + currency wars are just getting started. At least the Bond market loves it (see below from Wikipedia - makes sense given what we see). Toss in a pile of Regime Uncertainty regarding tit-for-tat tariffs - and things get really entertaining.

"All else constant, the lower capacity utilization falls (relative to the trend capacity utilization rate), the better the bond market likes it. Bondholders view strong capacity utilization (above the trend rate) as a leading indicator of higher inflation. Higher inflation—or the expectation of higher inflation—decreases bond prices, often prompting a higher yield to compensate for the higher expected rate of inflation."

Joe A's picture

Cheap steel? Good for making weapons cheaply. What could possibly go wrong?

gaoptimize's picture

I think this is partially a lack of imagination at the retail level by steel and some commodities makers.  I saw that steel is going for less than $500 per metric ton, and yet I can't find it in usuable formats at Lowes or any other retailer in my area. I want to put 7.62- and M855 stopping plates below my windows and a few on my porch.  I want a 3ft high, 25ft2 steel gated barricade outside my front door.  Alibaba sells plates, but the quantities and shipping are prohibitive.  I've never received a call from a steel manufacturer asking me: "If we sold steel at the retail level, what formats would you want it in?"  The same with copper and lead.

Ms No's picture

I would stop by the local Praxair and find out where people are getting their metal. Nothing should have to be shipped in, unless your way out of town somewhere. Then ask to go in the back and look and see what they have.  Otherwise they will try to give you their own stupid ideas. Often they are concerned with selling bulk but they can cut anything and there is also usually a pile of stuff that is cheap because it's been cut and is small.  There would be good window material there and probably some stainless. 

For a barricade or fence you can grab sheet or whatever here and there, it has to be welded together anyway.  Sometimes if you tip the guys who shuffle metal around they will give you a call when they see something you are looking for, for cheap.  I always wear a tight shirt and get in good with guys myself.  ( :  A lot of times that "scrap" pile is a wheel and deal sort of thing.  Sheet isn't going to be cheap but you might not need as much of that as you think.  Scrap pipe, round bar and tube is really good for alot of those things.     

Youri Carma's picture

And this:

China hopes ZTE can be removed from U.S. export restriction list as soon as possible U.S. Commerce Department to place restrictions on China’s ZTE
SimplePrinciple's picture

The US seems to be doing everything it can to provoke Russia and China.  Russia has said to heck with it, and will not play those games.  China seems still hopeful of amicable resolution by taking symbolic steps. As I said before, "mild".

me or you's picture

It is because iPhone is loosing ground worldwide due Chinese smart phone makers.

CTG_Sweden's picture




In the short term China may be the biggest loser in a trade war because of its great trade surplus. But in the longer term I suspect that China would be the winner in a world with more protectionism since China´s potential domestic market is so huge. The winners, if we get more protectionism, are countries with a big domestic market. The losers are those with a small domestic market. I have recently posted more comments on this topic:



Fri, 04/01/2016 - 06:45 | 7389669 new CTG_Sweden


roddy6667's picture

China has many construction projects going on in other countries. They are building factories, dams, railroads, ports, airports, etc. Perhaps they can use some of that surplus there.

just the tip's picture

i can only imagine, in the fine print of contracts to construct those projects, it says somewhere, "don't use any cheap chinese shit to build this stuff".

Big Stapler's picture
Big Stapler (not verified) Apr 1, 2016 4:47 PM

Obama's TPP proves just as successful as his other scams.

Maybe he should spend another $11 million of taxpayer money to play golf in Hawaii, because nothing stimulates an economy like hundreds of SEAL snipers keeping the people off a golf course.

Stormtrooper's picture

Oh God!  If just one of those Seals would follow their oath to the Constitution and take out the illegal alien posing as POTUS!!! 

Wile-E-Coyote's picture

Fuck China the yellow bastards.

Ms No's picture

Do we even make steel anymore?  I thought that process involved the use of coal and was consequently outlawed for being one of the trades of Satan. 

roddy6667's picture

I was in Bethlehem, PA last year. They have a rusting hulk that used to be the largest steel mill in the world. The whole area was covered in acrid dust worse than Beijing now, but Americans were working. That same thing was happening in industrial cities all over America. Now we have abandoned factories, no jobs, and clean air.

Faeriedust's picture

So.  Soon we will need to rebuild, as trade wars make autarky a new necessity.  Perhaps we can do it wisely and well, instead of in a rush to crank out as much profit as possible in equally as short a time, without concern for economic or environmental stability.  Perhaps we can become a model for a 21st century concept in heavy manufacturing, instead of the filthy old Victorian sort.

I suggest tapping Yellowstone.  The Icelanders have been working on using magma heat to smelt aluminum, why shouldn't we?  We have possibly the largest potential geothermal energy supply in the world running up and down the Rockies. For massive, energy-dependent industrial work that requires intensive capital build, there's no good reason not to make that build where free energy is available.  We used to do that by building factories next to fast-moving rivers.  Same principle.  Much of our ore is near the same area, too.  Wyoming and Montana could become our new industrial heartland.  Think of it as an opportunity to create the most competitive industry of the 21st century.

popeye's picture

Good sentiments, but isn't USA the home of the pre-eminent profit motive? So the most profitable process will be implemented (unless a sufficient pile of $$ are backhanded to create a federal subsidy), the populations well-being be damned.

RedDwarf's picture

Begun, the Trade War has.