US Trade War With China Escalates On Steel Tariff Plan

The US International Trade Commission will put a 15.72% tariff on steel pipe imported from China. The ruling is based on a preliminary finding by the division of the Commerce Department. A final decision is due in August. If the investigation also finds that Chinese steel is being sold below its market value, the tariff will become permanent. The announcement of the action said:

If Commerce makes an affirmative final determination, and the U.S. International Trade Commission makes an affirmative final determination that imports of drill pipe from China materially injure, or threaten material injury to, the domestic industry, Commerce will issue a countervailing duty order.

The decision follows one earlier this year that punished Chinese tire exports that the government found were being dumped on U.S. markets.  Shortly after those tariffs were set, China retaliated by adding fees to US chicken parts exported to the People’s Republic. The actions show that the Administration is most concerned about inexpensive Chinese products, which a number of experts argue are a byproduct of the current valuation of the yuan.  China, it seems, is willing to retaliate.

China neeeds to improve its export levels. Unions in the People’s Republic are striking more often for higher pay. The most recent work stoppages were at Honda Motor (NYSE: HMC) plants, but there is news that the unrest over wages is spreading quickly.

China finds itself in a trade vice. Tariffs set by the US and a possible revaluation of the yuan will make the price of Chinese goods more expensive. At the same time, China needs to offset higher labor costs by charging higher prices.

China has had the upper hand in labor costs and export pricing for years. Now, economists have turned their attention to strikes and resulting increased worker compensation. The Commerce Department may pose an equal danger.

Douglas A. McIntyre