Stephen Olson

Opinion | For all the diplomatic reassurance, US-China trade tensions are growing

As trade investigations into Chinese shipbuilding, steel and aluminium suggest more tariffs and a review of Trump-era tariffs unlikely to end in a rollback, expect China to respond with force

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Stephen Olson

Published: 8:30pm, 23 Apr 2024Updated: 11:43pm, 23 Apr 2024

A flurry of US trade actions targeting China point to a looming intensification of the US-China trade war and raise questions over whether the relationship is moving towards more stable ground, as officials have recently asserted.

Speaking last week to steelworkers in Pittsburgh, President Joe Biden said he had asked US Trade Representative Katherine Tai to consider tripling tariffs on steel and aluminium imports from China, currently at 7.5 per cent. The US is also launching a trade investigation into China’s shipbuilding industry, which could mean additional tariffs.

And finally, Tai’s office is soon to announce the results of its review of the Trump administration’s punitive tariffs on China. While minor modifications are possible, the only plausible scenario is for the Biden administration to largely maintain the tariffs.

The steel and aluminium tariffs are economically dubious but politically imperative, while the shipbuilding investigation is all but certain to uncover Chinese subsidies, and the tariff review is likely to formalise Biden’s embrace of Trump-era tariffs. Expect China to hit back hard against any additional levies.

The economic rationale for tripling tariffs on China’s steel and aluminium exports is mixed. Previous punitive tariffs had all but closed the US market to Chinese imports. China’s share of US steel imports was a paltry 2 per cent last year – hardly a flood requiring the protection of tariff tripling.

Several factors, however, have set off the alarm bells in Washington. China’s steel exports rose by over a third last year, fuelling concerns that we might only be seeing the leading edge of what will become a much larger wave. China is expanding subsidies to revive sluggish growth, while domestic demand remains insufficient to absorb the excess capacity.