The Trump administration’s first point of attack against China’s trade policies has been chosen.
President Donald Trump will sign an executive order targeting excess steel dumped into the U.S. soon after China President Xi Jinping departs from his state visit in Florida, reports the New York Times.
The measure appears to be aimed squarely at China, which Trump has criticized for its unfair trade practices and which has tried but failed to reign in its steel industry’s record overcapacity.
The U.S. government has targeted excess Chinese steel for years. The Obama administration brought complaints before the World Trade Organization and last September the U.S. Commerce Department accused China of dumping steel.
But an executive order would elevate the issue and put China in a difficult spot.
China’s government last year aimed to reduce excess steel capacity by 45 million metric tons. It actually outpaced its goal by 15 million metric tons. But shutting down plants wasn’t enough to reduce steel production. The factories that survived simply cranked out more steel despite lower levels of demand. Chinese steel production grew by 1.6% last year. Experts contend Chinese steel, like aluminum, can evade anti-dumping measures on its way into the U.S.
Any more reductions in Chinese steel capacity will come slowly because closing factories leads to unemployment and unpaid bank debts, two problems that local Chinese governments are loath to be seen causing, notes Moody’s analyst Jiming Zou.
Since 2007, China has added more than 550 metric tons of new steel capacity, equivalent to seven times the amount produced in the U.S. The country is now responsible for 46% of global steel overcapacity, according to Duke University’s Center on Globalization, Governance & Competitiveness.
Before Trump assumed the presidency, analysts predicted steel would be one of the first Chinese industries targeted in lieu of an all out trade war and across-the-board high tariff.
If more executive order are to follow one on steel, there are plenty of targets: Chinese industries that have also been named in WTO disputes include aluminum, auto and solar glass, and car parts.