Beijing ‘likely to hit back’ if US raises tariffs on metals
Biden’s call to triple duties on steel from China could start new round of retaliation, experts say
Beijing is likely to retaliate against the higher US tariffs on Chinese metal products proposed by US President Joe Biden, analysts said, creating a new trade battleground between the world’s two largest economies and a staging area for complaints over the Asian manufacturing giant’s industrial overcapacity.
Biden called for a tripling of import tariffs on Chinese steel and aluminium as he campaigned for re-election in Pittsburgh, a city in the swing state of Pennsylvania that was once the nexus of the American steel industry.
This is the first major tariff proposal on Chinese products from Biden, who has maintained all the duties initially levied under the administration of Donald Trump – his predecessor and presumptive challenger in the November presidential election.
China’s first-quarter gross domestic product rose 5.3 per cent from the year before, growing by 1.6 per cent from the previous quarter. But analysts have flagged concerns over an unbalanced recovery that looks to rely heavily on manufacturing and exports.
The US Trade Representative’s (USTR) office also initiated a probe into China’s maritime, logistics and shipbuilding industries, alleging Beijing used “unfair, non-market policies and practices” to dominate these sectors.
Henry Gao, a law professor at Singapore Management University, said he would not be surprised if China imposed countermeasures against the proposed tariffs through countervailing duties against US firms.
“I don’t think the recent meetings [between senior officials from China and the US] will help, as they are more to stabilise the relationship and avoid major surprises on issues such as Taiwan,” said Gao, a veteran researcher on international trade issues.
“But they are unlikely to alleviate concerns over economic competition.”
Lu Xiang, a senior researcher with the Chinese Academy of Social Sciences, said he expected the US to take action against China “all the way up to the election” as Biden pushed to win a second term.
“The scale of China’s response will depend on how big of an impact the latest US investigations will have,” Lu said. “Even though the move was driven by elections, China will not take that into consideration when formulating a response.”
In a statement yesterday, the Ministry of Commerce said it was “dissatisfied with and firmly opposes” the USTR’s investigation into China’s maritime, logistics and shipbuilding sectors. It made similar comments in relation to the US’ claims about steel and aluminium, affirming its opposition and saying the accusations have “no factual basis”.
The American Iron and Steel Institute said in a statement that while there had been no surge in Chinese steel shipments to the US, the metal was often sent to third countries to be processed into other products which then entered the US market.
Bryan Mercurio, professor of law at the Chinese University of Hong Kong, said the trend suggested China had reopened its old playbook and chosen to export its way out of an economic downturn.
“This may not be a good thing for everyone’s economy, as an oversupply of commodities leads to a reduction in prices and uncertainty for enterprises in other countries,” Mercurio said.
US Treasury Secretary Janet Yellen said there was “nothing off the table” where China’s manufacturing capacity is concerned – a statement implying additional tariffs could be coming to stem a perceived flood of cheap goods – following her visit to the country earlier this month.
In March, China increased its steel exports to 9.89 million tonnes – up 25.3 per cent compared to March 2023 – and its exports of unwrought aluminium and aluminium products amounted to 510,000 tonnes, a year-on-year increase of 3.1 per cent according to Chinese customs data. In February, China exported just 120,220 tonnes of steel to the US.
“China’s share of US steel and aluminium imports are microscopic, so even if tariffs essentially closed the US market in these sectors, the impact on overall US-China trade would be small,” said Stephen Olson, a visiting lecturer and non-resident fellow at the University of Nebraska Lincoln’s Yeutter Institute of International Trade and Finance.
“The tariffs would take on much greater significance, however, if they signalled the start of a new and rapidly escalating round of trade retaliations.”
When US Secretary of State Antony Blinken visits China next week, he could face a “disappointed” Beijing that is less willing to align itself with Washington on issues such as the conflicts in Ukraine and the Middle East.
The foreign ministry has not confirmed the dates for the trip but Politico reported that Blinken would leave for China on Tuesday for a four-day visit.
The disappointment in Beijing is largely because the White House has prefaced the trip with a proposed tariff increase and an investigation aimed at tackling China’s “unfair” trade practices in various sectors, according to diplomatic observers.
On Wednesday, the Biden administration called for a tripling of import tariffs on Chinese steel and aluminium, and directed trade representative Katherine Tai to launch an investigation into China’s alleged subsidies in the shipbuilding, logistics and maritime industries.
“[China] ends up dumping extra steel on the global markets at unfairly low prices,” US President Joe Biden said at an election stop in Pennsylvania. “They’re not competing, they’re cheating.”
Tim Summers, an assistant professor at the Chinese University of Hong Kong’s Centre for China Studies, said that the US announcements pointed to a “more confrontational” approach towards China. As a result, Washington would find it harder to gain Beijing’s help with issues such as the crises in Ukraine and the Middle East, he said.
“[The] latest announcements suggest the US administration will bow to pressure to shift to a more confrontational stance,”
Summers said, adding that it was “unlikely to ease” with US presidential elections looming.
Wang Yiwei, a professor of international relations at Renmin University, said the tariff talk was part of Washington’s “negotiation strategy” and a “big stick” that Blinken could use in his discussions with Chinese officials.
Blinken is expected to raise US concerns that China was helping Russia to build up its defence industrial base. Beijing has denied aiding Moscow, but it has also refused to criticise its actions.
Wang said Blinken could present China with two options: to either face the possibility of higher tariffs or to concede its position on the Ukraine war. “This is a negotiation tactic,” he said.
Josef Gregory Mahoney, a professor of politics and international relations at East China Normal University, said the potential tripling of tariffs and the trade investigation would “affect but not derail” Blinken’s visit.
“Certainly it will be a talking point when he comes,” he said, adding Blinken would also focus on other geopolitical issues like Taiwan and the South China Sea.
“[US Treasury Secretary Janet] Yellen warned there was more turmoil on the horizon during her visit [earlier this month], and this is normal during a presidential election year anyway, when US politicians employ dog whistle tactics, often wagging their fingers at others, including China.”
Mahoney said the tariff announcement could prompt Beijing to register “strong disappointment” with Blinken’s visit. That is despite signs of improvement in the China-US relationship after the meeting between Biden and President Xi Jinping in November. The two also spoke on the phone this month.
Wang said Washington’s recent rhetoric – and China policy – should be seen against the backdrop of November’s elections and efforts by politicians to appease voters.
Biden is facing a tough re-election battle and is trying to avoid looking weak on China or getting outflanked on trade policy by his opponent, Donald Trump, the former president who has campaigned on protectionism and a pledge to impose a 60 per cent tax on imported Chinese goods.
“[The US] always plays these cards against China. This makes China very disappointed,” Wang said. “US-China relations are often sacrificed.”
But other analysts were more optimistic about Blinken’s visit.
Chong Ja Ian, professor of political science at the National University of Singapore, said both sides “presumably wish to continue engaging despite the [tariff] announcement” given that the trip had not been called off.
Chong said negotiations and diplomacy could involve “a bit of pressure and friction”.
“In fact, differences may create more demand for dialogue” he said. “That they are engaging is important. That demonstrates a willingness to discuss matters, including differences.”