China Market Insider US tariffs on steel and aluminum harm the USA and Europe

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The new US tariffs on steel and aluminum will not solve the problem of Chinese dumping prices, say Chinese insiders and international experts.

On the one hand, China exports very little steel and aluminum directly to the USA. On the other hand, it is difficult for Beijing to end the subsidization of its manufacturers for domestic reasons.

US President Donald Trump announced on February 10 that he wants to impose tariffs of 25 percent on all imports of steel and aluminum into the USA, "without exceptions." The new tariffs are to take effect from the beginning of March.

China protested reflexively and with the usual phrases. The new tariffs are a "typical example of unilateral and protectionist behavior," said He Yongqian, a spokesman for the Chinese Ministry of Commerce.

But China can react relatively calmly to Washington's new aluminum and steel tariffs because it exports very little of both metals directly to the USA due to existing trade barriers.

Figures from the US Department of Commerce show that China exported only 0.2 million tons of aluminum to the USA last year. The largest foreign supplier of aluminum there, however, is Canada with 3.1 million tons. The United States' neighboring country can produce metal very cheaply due to its many dams and cheap hydropower.

Direct imports of steel from China to the USA hardly play a role either. Last year, the People's Republic sent only the relatively small amount of 508,000 net tons of steel to America. This accounted for only 1.8 percent of all US steel imports in 2024.

However, China plays a dominant role in the international supply chains for steel and aluminum, which indirectly affects manufacturers in the USA. The People's Republic produces more than 50 percent of the global steel supply and more than 60 percent of that of aluminum—and Chinese manufacturers receive subsidies from the state.

"China is at the center of Trump's tariffs on steel and aluminum," headlined the New York Times the morning after the US President's announcement of the 25 percent tariffs.

China "floods" the world markets with artificially cheap steel, so the argument goes. This sometimes leads to "transshipments" of Chinese steel through third countries to the USA, but above all to low steel prices everywhere, which is why domestic production in the USA is no longer profitable.

Subsidies are intended to protect the labor market

Market insiders in China admit that many steel mills and aluminum smelters in China receive high subsidies from the state, without which they would have had to close long ago. However, this is not part of a plan to dominate the world markets, but rather the fear of rising unemployment at home. Since the real estate crisis in China, the demand for steel and aluminum has sharply decreased.

Many millions of jobs would be threatened either in the steel and aluminum plants directly, or in the downstream industries, if Beijing no longer supported manufacturers with subsidies.

The government in Beijing simply has no choice but to continue to keep manufacturers at home on life support until their structural reforms of the domestic economy gradually take effect. Punitive tariffs, regardless of who imposes them, cannot change that. Due to the political sensitivity of the issue, none of the insiders we spoke to wanted their names cited.

Chinese manufacturers, in turn, have no choice but to constantly seek out new markets for their steel and aluminum. This is done either by exploring new markets or by increasing the use of steel in growing industrial sectors. "As long as the music plays, we have to keep dancing," described a manager of a Chinese steel mill.

For example, the share of Chinese steel sold to the domestic manufacturing industry or shipbuilding increased last year relative to other segments.

"The US steel and aluminum tariffs will not solve the Chinese dumping problem," writes the American Center for Strategic & International Studies (CSIS) in a study. "The challenge posed by Chinese steel dumping is real, but slapping unilateral tariffs on imports is like using a sledgehammer when we actually need a scalpel."

Most observers expect that the new Trump tariffs will harm China less than the manufacturing industries in the USA and in allied countries like Germany. "They act like taxes on US industries that rely on steel and aluminum, driving up costs and fueling inflation," according to CSIS. The same applies to companies in the automotive, construction, and mechanical engineering industries in Germany and Europe.

Trump receives applause only from domestic industry associations that represent the direct interests of steel and aluminum manufacturers, such as the "Steel Manufacturers Association" in Washington. He is also at least temporarily keeping his campaign promises in important states like Pennsylvania.

Otherwise, according to the unanimous assessment of observers in China and abroad, the new tariffs will paradoxically harm those they are supposedly meant to help—the employees in the manufacturing industry in America and Europe, where even more job losses are expected due to increased costs.

From Beijing's perspective, it is also likely that some of the countries targeted by US tariffs will seek even stronger cooperation with China, both in trade and geopolitical matters.

*Henrik Bork is Managing Director at Asia Waypoint, a consultancy specializing in China, based in Beijing. "China Market Insider" is a joint project of the Vogel Communications Group, Würzburg, and Jigong Vogel Media Advertising in Beijing.

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