China Warns US of Retaliation Over Metal Tariffs

China said proposed US tariffs on imported steel and aluminum products are groundless and that it reserves the right to retaliate if they are imposed.

The recommendations, unveiled by the US Commerce Department on Friday, aren’t consistent with the facts, Wang Hejun, chief of the trade remedy and investigation bureau at China’s Ministry of Commerce, said in a statement posted on its website, Bloomberg reported.

Commerce Secretary Wilbur Ross said the US may impose quotas on imports of aluminum and steel, including a tariff of at least 24% on steel imports from all countries. While it’s the strongest indication yet that President Donald Trump’s administration is ready to take action on its protectionist agenda, Ross said “it wouldn’t surprise us” if the measures were challenged. The US already has excessive protections on domestic iron and steel products, according to Wang.

“If the final decision impacts China’s interests, China will certainly take necessary measures to protect its own rights,” Wang said.

American steel companies and steelworker unions have been pushing Trump to follow through on his promise to protect the industry. China’s trade partners have complained for years that its industry unfairly benefits from state subsidies, and dumps its products at below-market prices. While China only accounts for about 1% of US steel imports, it could challenge US action at the World Trade Organization, a process that could take years.

China has long been at the epicenter of global over-production of steel. But the trade dynamics are shifting as aluminum exports take center stage. In January, China boosted its shipments of the lightweight metal for a third month, as domestic supplies spill overseas, while steel cargoes shrank to the lowest in nearly five years as strong domestic growth mops up production and environmental curbs trim capacity.

Rather than tariffs on all imports, Trump may opt for a more “surgical” approach, Ross suggested at a meeting with lawmakers this week. On steel, for example, the president could go with the recommended option that would levy a tariff of 53% on imports from 12 countries—a list that includes China, Russia, India and South Korea—but allow exemptions for allies such as Japan, Germany and Canada.

India’s steel industry, which vies with Japan as the world’s No. 2 after China, probably won’t be hurt, according to K. K. Pahuja, president of the Indian Stainless Steel Development Association, in a report in the Business Standard. Stainless steel “is not a big-ticket item, since the quantity is not very high,” Pahuja told the newspaper. India itself imposes extensive trade barriers on Chinese steel.