BOFIT Viikkokatsaus / BOFIT Weekly 2018/10

On Thursday (Mar. 8), president Donald Trump made good on his blunt protectionist threat to apply general import tariffs on steel (25 %) and aluminium (10 %). However, it is still unclear whether "allies" will be exempted, and thus the question of possible countermeasures remains open. Canada is by far the most important supplier of these products to the US.

China is not a major provider of steel and aluminium products to the US nor do the exports of affected products ($2 billion per year) play a big role in Chinese exports. The tariffs are unlikely to reduce the US trade deficit with China. The value of affected Russian metal products sent to the US is about the same as for China, but the US aluminium market is important to Russia.

China has been a popular whipping-boy of Trump-era trade policy. First major tariff hikes were introduced in January, when 20–50% punitive tariffs were placed on Chinese solar panels and washing machines. Last month, the US also decided on anti-dumping tariffs on Chinese aluminium foil.

The politburo's top economic advisor Liu He last week travelled to Washington DC to discuss China-US economic relations. The talks were confidential, but the countries promised to continue discussion of trade policy disputes in Beijing. China has threatened a response to the tariff hikes, but to ease tensions, it has also repeated its commitment to opening up its markets to the world.

China's overproduction and subsidising of steel have fuelled of a long-running dispute also with the EU. The EU imposed a 17–28 % anti-dumping tariff on Chinese corrosion-resistant steel last month. This week the EU announced it would also continue its antidumping tariffs on steel pipe.