China Threatens To Retaliate If US Imposes Metal Tariffs

It's not like anyone expected otherwise.

Just hours after the Trump administration received a green light from the Commerce Department to impose steep tariffs on aluminium and steel imports on national security grounds across the board, but especially on China and Russian, China threatened with immediately retaliation in the latest escalation of the growing trade war between the two superpowers.

In an unexpected announcement on Friday, commerce secretary Wilbur Ross recommended a possible global tariff of at least 24% on imports of steel and 7.7% on aluminum after investigations into trade in both metals determined that import surges seen in recent years “threaten to impair [US] national security.”

Responding to the unprecedented Commerce recommendation which many interpreted as the first official salvo in global trade wars, Wang Hejun - chief of the trade remedy and investigation bureau at China’s Ministry of Commerce - said imposing tariffs on such grounds was reckless.

Quoted by the FT,  he said that "The spectrum of national security is very broad and without a clear definition it could easily be abused," and added that “if the final decision from the US hurts China’s interests, we will certainly take necessary measures to protect our legitimate rights."

For now the threat of "nuclear" trade war seems to be contained: analysts say Beijing is wary of escalating any trade disputes for fear of damaging its export-dependent economy, and so will focus any retaliation on specific sectors — most likely particular agricultural goods such as soybeans, for which China is the US’ largest export market. Earlier this month, Beijing launched an anti-dumping investigation into US exports of sorghum, an animal feed.

For the moment I think China will just put out harsher rhetoric,” said Bo Zhuang, an economist at consultancy Trusted Sources. “Agricultural sector retaliation is more likely since (China’s) food price inflation is low. The next possible step will be going on further with a soybean and corn investigation."

Still, expectations of only a "cold" trade war may soon be dashed, as Friday's action shows that trade hardliners in the Trump administration are eager to take action against China "after months of internal debate" according to the FT.

One option presented by the commerce department on Friday was a targeted tax on steel and aluminium imports from China and other countries like Brazil and Vietnam. A third option would impose quotas to reduce metals imports from all countries to far below the level of 2017.

But the recommendations illustrate how Mr Trump’s desire to hit China, which the US steel industry blames for a collapse in metal prices in recent years, may result in collateral damage for US allies and invite retaliation.

Meanwhile, as China plans its response, European officials in Brussels are already drafting their retaliatory measures aimed at politically sensitive US products like Kentucky bourbon and Wisconsin dairy products, which will be implemented if Trump opts for a global quota or tariff system.

As a reminder, Trump has until April to decide whether to adopt any of the recommendations, Ross said. The long-awaited results of the “Section 232” investigations into aluminium and steel imports caused shares in major US producers to rise sharply on Wall Street on Friday, while companies in the materials sector slumped.

In what appeared to be a jusitification of imminent trade wars, Trump said he was convinced that imposing tariffs would “create a lot of jobs” during a meeting with members of Congress, and dismissed warnings that such measures in the past had hurt more than they had helped by causing higher costs for many companies.

“I want to keep prices down but I also want to make sure that we have a steel industry and an aluminium industry and we do need that for national defence,” Mr Trump said. “If we ever have a conflict we don’t want to be buying steel [from] a country we are fighting.”

In its report, the commerce department stated that Canada is the top supplier of both metals to the US, suggesting the NAFTA member may - ironically - suffer the most from any new protectionist measures. The northern US neighbour has long been treated as part of the US defense industrial base along with countries like the UK and Australia. But whether Canada or any other allies would be exempted from the proposed tariffs remains unclear, according to the FT.

As for China, it was "only" the fourth-largest supplier of aluminum to the US in 2017, and accounted for less than 10% of imports; it was also the 11th-largest steel supplier over the same period, with a roughly 2% share of US imports.

The US commerce department argued that the rapid rise in China’s production of steel and aluminium in recent years — it now produces more than half of global output of both metals — has depressed international prices.

While the threat of a sharp escalation in trade tensions remains low for now, in commentary from SMBC Nikko Securities, the bank said that the proposal to restrict steel imports "could lead to a chain of higher tariffs imposed by other nations" resulting in dramatic imbalances in global commodity trade and prices.

While the brokerage expects direct impact on Japanese steel industry to be limited, it admits it is difficult to gauge the effect on international markets given details yet to be decided, and adds that the risk is that other countries shipping steel to U.S. begin selling cheaply on Japan’s export markets; in effect a sharp escalation to trade wars in which countries not targeted by the US scramble to take away market share from dominant trade partners.

Comments

Mr. Ed stizazz Sun, 02/18/2018 - 23:37 Permalink

Nah,  China's got it in the bag.  Xi and Trump worked it all out:

Xi: OK, so you make accusations, get your panties all in bunch and slap trade tariffs on us.

Trump: Right.

Xi: Then, we get our panties in a bunch and slap trade tariffs on YOU!

Trump: Right!

Xi: Then we both sit back and drain huuuuge money out of the pockets of our citizens by taxing imports, but we call it a tariff instead of a tax...

Trump: Right! Ha! Ha! Ha! Ha! Ha! Ha! Ha! Ha! Ha!

Xi: I love it! Ha! Ha! Ha! Ha! Ha! Ha! Ha! Ha! Ha!

In reply to by stizazz

dirty fingernails Xena fobe Mon, 02/19/2018 - 01:10 Permalink

Absolutely, it's just that it caused a tremendous amout of pain over the last 40 years getting to this point. Try to reverse it too fast and with the price increases and resulting unemployment feedback loop you'll have riots in the streets. A strong economy would be severely strained, but the US economy is anemic at best. Increase prices and how does all that private debt get serviced?

In reply to by Xena fobe

Daddio7 Perimetr Mon, 02/19/2018 - 03:05 Permalink

Like Rush says you have swerved into the truth. We are totally dependent on a sworn enemy for most of what our economy depends on. Do you need a smart phone or computer, better keep China happy. Parts to keep your car running or fix an expensive appliance, yep, China. Even people who do not shop at Walmart have a house full of Chinese produced goods.

In reply to by Perimetr

vato poco Daddio7 Mon, 02/19/2018 - 03:46 Permalink

"we're dependent on china"? really?

saaaay, what would happen if all US/China trade were to stop for whatever reason? welll, we here in the US would have to make do with our existing cell phones & big-screen TV's, rather than getting the next years' model; also we'd have to do without all the cheap plastic crap bullshit that China excels at making. WE'll be fine: am willing to bet almost every US household of upper-lower class & up has least 2 and probably 3 of everything: TV's, laptops, toasters, blu-ray players ....

CHINA, OTOH, would have to shutter ALL the factories that make all that shit we don't really need. thus putting 300 million? 400 million? more? factory workers on the street. where they'll start rioting and overthrowing their government within a month. it's the commies' worst nightmare: the proles with time on their hands!!

Q: so who's the Big Dog in that scenario? who needs who more?

 

In reply to by Daddio7

hwy vato poco Mon, 02/19/2018 - 04:39 Permalink

How many people and companies are selling chinese goods?

Do you know from which country the US is generating the most income in it's tourist industry?

Google please!! Look, the US is living only on printed money. No amount of local manufacturing can help US pay it's debt.

Do Americans want to work? Would Americans stop being choosy with jobs? Minimum wage? Or just import illegals.

The present elder chinese remind daily their kids how life was not long ago and in past 2500 yrs. The are always prepared in mind of rainy days. The chinese saves most of what little they earn. History remind them of letting themselves grow FAT.

Almost all have a home to go back in the country side in hard times. The world is big, and chinese is expanding to other continents. They will earn less and waste less on travelling and luxury goods. 

US can grow it's treasury by doing business with it's own ;ocal citizens !! 

In reply to by vato poco

BiggestLoser vato poco Mon, 02/19/2018 - 07:54 Permalink

We are dependent on China for all the heavy rare earth metals used in our hi tech including all of the smart bombs, missiles and delivery systems. Without Chinese cooperation the DoD would be a one shot pony. The Army, Navy, Air Force and Marines would be shooting blanks after the first round.

The Chinese built a $400 billion hi tech industry from scratch since the '90's when the US EPA and NRC regulated the mining of heavy rare earth minerals out of the US.

In reply to by vato poco

SilverDOG Perimetr Mon, 02/19/2018 - 07:53 Permalink

 

 

Wal-Mart... what is this place ?

 

Just kidding.

But, I have not been in years.

The place smelled toxic, dirty surfaces, full of self loathing & masochistically consuming obese, purchasing low grade, disposable, income wasting products.

Reminded me of pre Wal-Fart Ames in its last days; disgusting.

When such has empty shelves, lock-n-load as societal varmints will begin scavenging.

In reply to by Perimetr

Nexus789 IH8OBAMA Mon, 02/19/2018 - 01:43 Permalink

US share of world trade will continue to fall and the US is becoming less relevant to China. The only way to stop China is war but no one wins that little outcome.

China's markets are increasingly in Asia and Europe. The size of the middle class market in Asia is around a billion people. 

In reply to by IH8OBAMA

hwy my new username Mon, 02/19/2018 - 13:14 Permalink

No one gets raped unless willing. Did the Chinese used force? It was Americans who invited to be raped not only chinese, also by Indians. Now the US is happily spreading her thighs courting the BJP and Punjabis.

While US was spending trillons to be first on military, others were spending billions for their population to live better.

If you want to drive Lamborginis, don't forget the inssurance, the tax, benzine and parts maintenace can drain your resources if you don't have proper income. Then you will have to steal from your sons/daughters - deprive them of what they deserve. Better drive a 4 cylinder and have my kids fed and educated.

Your grandpa built his business, was running well, can afford Lamborghinis. You can't. It's time to stop putting too big a hat on a head that is too small. You choosed your master. Don't blame others.

In reply to by my new username

MozartIII FreeShitter Sun, 02/18/2018 - 21:44 Permalink

"Dump those worthless fucking treasuries back the yuan with gold."

 

You are not American! You are a troll!

 

No American with 1/8th of a brain would advocate for this. It will devastate you to the point of having no food or shelter for your selves or families! 

 

That, or your a clueless marxist, that wants the utter poverty for your community/country. As has been proven around the world for the last generation plus. Look at Venezuela as the latest example!

 

Your might be lacking in examples as a government troll and government school example. Just let me know, I have many!

In reply to by FreeShitter

roddy6667 Which is worse… Mon, 02/19/2018 - 04:32 Permalink

You are talking to a lot of people who have never been outside the US. They have propaganda cartoon versions of reality about the outside world circulating in their heads. They are afraid of everything, including the Russians under their bed, and most of all...COMMIES!. Of course, they have never met anybody from Russia, never mind been there. And they couldn't define the word "communist" if you gave them a thousand tries. But they have very strong opinions about all these things they don't know.

Americans are ignorant and proud of it.

In reply to by Which is worse…

Oldguy05 FreeShitter Mon, 02/19/2018 - 02:04 Permalink

Social security has been raped and replaced with IOU's ....from the guys that raped it.....Treasury bonds backing the rape is like borrowing from yourself and telling yourself you'll pay it someday. Yeah. Sure you will. I owe myself!

Yields are climbing. Gotta get me some of that! There's a reason we have to sell shit for less of a return, but more of an incentive.

End The Fed!

In reply to by FreeShitter

GreatCaesar'sGhost Savvy Sun, 02/18/2018 - 23:29 Permalink

The US exported $115 billion in goods to China. We imported $462 billion from them. Yeah, they have a chance of winning a trade war. They'll lose over $300 billion in profit. They'll be riots in the streets of Peking. We own those commies, now. Looks like they're going to hang themselves with the rope we slapped tariffs on.

In reply to by Savvy

Truth Eater buzzsaw99 Sun, 02/18/2018 - 22:17 Permalink

chinese were given our markets to plunder for decades....  screw those slant eyed jews.  They are thieves.  Tariffs will help pay off tax loads while encouraging our businesses to start growing.  It is way overdue that we bring manufacturing back home.  China has already cheated the American businesses and now are mad that we are stopping their game.  They want to keep sucking our blood and complain when we say cut back on draining the life out of us.  Fuckem.

In reply to by buzzsaw99