World Economy

US Imposes 500% Duty on Chinese Steel

US Imposes 500% Duty on Chinese SteelUS Imposes 500% Duty on Chinese Steel

The US has imposed duties of more than 500% on Chinese cold-rolled steel, used to make cars and washing machines, as a backlash escalates against a glut of Chinese steel flooding global markets.

In a final ruling, the US Department of Commerce added anti-subsidy duties of 256.4% to anti-dumping duties of 265.8% on steel produced by mills including Baosteel Group and subsidiaries of Ansteel Group, known as Angang. It imposed much smaller tariffs on Japanese steel producers, AP reported.

Chinese steel capacity has soared in the past decade to more than one billion tons, sending surplus production flooding into international markets especially after domestic consumption peaked in 2013. Beijing routinely calls on the sector to cut capacity but at the same time it is unwilling to allow the failure of large mills, especially those of state-owned groups that are often the biggest employers, taxpayers and borrowers in their locality.

Stocks of beleaguered US steel producers surged when initial anti-dumping duties were announced in March. The final ruling involves higher anti-subsidy duties than the commerce department initially indicated.

The hefty tariffs will harden Chinese negotiators’ desire to acquire “market economy status” at the end of this year, as outlined when China joined the World Trade Organization 15 years ago. Market economy status would protect Chinese exports from being assessed on the basis of prices in third-party countries, which are often higher, and from being assessed for both anti-dumping and countervailing duties.

Pressure from the steel industry in the US and Europe has led to political opposition to automatically granting the status to China. The steel industry fears being further swamped by Chinese exports, although consuming industries from automobiles to construction would benefit from cheaper steel.

When the 15-year delay was agreed, China was unwinding state-set pricing for many industries. However, Washington and Brussels point to the continued role of the Chinese state in investment and industry to argue that China is still not truly a market economy.

“They shouldn’t use other countries’ bases to measure Chinese cost but for 15 years they have,” said Mei Xinyu, a trade strategist advising the Chinese Ministry of Commerce. “Where’s the logic? Are they saying the Chinese economy hasn’t changed?”

Cold-rolled steel accounts for about a 10th of the $2 billion in Chinese steel the US imported last year.

US regulators are also in the midst of a number of investigations of other Chinese products, including other categories of steel.