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As early as March 2018, after taking office, Trump proposed the Section 232, announcing a 25% tariff on imported steel and a 10% tariff on imported aluminum, but Canada and Mexico, the partners of the North American Free Trade Agreement, were exempted. In July 2024, the Biden administration's Section 301 announced a 10% tariff increase on steel and aluminum products imported from Mexico that originated in China, bringing the comprehensive tax rate for exports to the United States to 35%. It is stipulated that steel products from Mexico will face a 25% tariff unless they are smelted and cast in Mexico, Canada or the United States. Aluminum products from Mexico must not contain primary aluminum smelted or cast in China, Russia, Belarus or Iran, otherwise they will face a 10% tariff. The United States claims that this move is to fill the loopholes that the previous government failed to address, preventing countries such as China from exporting steel and aluminum products to the United States through Mexico to avoid tariffs. Since then, China's direct steel exports to the United States have dropped from 3.5 million tons in 2018 to 0.89 million tons in 2024. On February 10, Trump said that he would announce a 25% tariff on steel and aluminum imports from all countries, but did not announce when the tariff policy would take effect. This marks a 60% tariff on Chinese steel products and an escalation of trade barriers.
1. Limited Impact on Direct Exports to China, with the Middle East Market as the Main Export Destination
In recent years, although China's steel exports have fluctuated, they have generally remained at a relatively high level. In December 2024, the steel export volume was 9.73 million tons, an increase of 4.85% month-on-month and 25.9% year-on-year. From January to December, the cumulative exports were 110.72 million tons, an increase of 22.7% year-on-year, reaching a new high since 2016. It can be seen that Southeast Asian countries such as Vietnam, the Philippines and Indonesia are important export destinations for Chinese steel. The growth rate of steel imports from China in Middle East countries such as Saudi Arabia and the United Arab Emirates is significant. However, the proportion of China's exports to North America is almost negligible. It is worth noting that the proportion of imports from China in Brazil and Mexico has increased in recent years, and Mexico accounts for more than 10% of China's exports. Therefore, it is expected that the impact on China's direct exports to the United States will not be significant, but the tariffs on downstream steel products from China, such as construction machinery, household appliances and new energy vehicles, may be increased.
2. Growth in 'Re-export' Trade Volume, and Tariff Policies May Exert Pressure on Japan, South Korea and Vietnam
Since 2018, the high tariffs imposed on China by the United States have spurred the growth of 're-export' trade volume. Taking Mexico as an example, steel trade between the United States and Mexico accounts for 35% of the total in the North American Free Trade Area. Mexico's steel exports to the United States also surged by more than 40% in 2024, of which more than 60% of the steel is 'suspected' of being re-exported. At the same time, Vietnam, China's largest steel trading partner in recent years, saw its exports to the United States surge by 143.4% in 2023, and some of them were achieved through re-export transactions. It is reported that after the goods arrive in Vietnam, they will be cleared through customs and have their containers changed in local bonded areas, and then apply for Vietnam's certificate of origin before being re-exported to the United States. Data shows that the tax on China's steel exports to the United States is 10 times that of Vietnam, so re-exporting in Vietnam can be profitable. This move by the United States will undermine the competitive advantage of global steel products in the US market, so as to encourage domestic enterprises to purchase domestic steel products. Meanwhile, it enables the United States to reduce its dependence on high-end production lines in Japan and South Korea and return to the US market. On the other hand, the apparent consumption of steel in the United States was 135 million tons in 2024, and is expected to be 137 million tons in 2025. However, the crude steel output in the United States was 79.5 million tons in 2024, a year-on-year decrease of 2.4%. Therefore, when the domestic production capacity in the United States cannot meet its own demand, it will still be dependent on imports. The low-cost resource market mainly in Asian countries will still have a certain share, and re-export traders will still exist. However, in the coming period, it is expected that more countries will launch anti-dumping investigations against China to limit the quantity of Chinese products entering their countries. In 2024, the number of cases filed exceeded 20, covering regions all over the world, mainly in Vietnam, Brazil, the European Union, South Africa, etc., and most of the categories involved are steel plates. But it is certain that in terms of development in the next decade, the Middle East (mainly the United Arab Emirates and Saudi Arabia) currently has fewer anti-dumping investigations on Chinese exports. Therefore, the Middle East will still be the main export market in 2025, especially Saudi Arabia, where the growth will be more obvious.
3. Limited Impact on China's Indirect Exports, and Other Countries May Reduce Imports from China
Except that the main export destinations of machinery, home appliances and ships are in Asia, accounting for about 50%, the main export destinations of automobiles are European countries, but most of them are re-exported to the United States through Mexico, and the dependence on the United States is not very high, less than 10%. Moreover, China has also reached an agreement with the European Union to cancel the tariffs on electric vehicles imported from China to Europe. Therefore, the impact of subsequent tariffs on automobile exports will be reduced. For home appliances, about 15% of exports are dependent on the United States, but the main export destinations are in Asia, accounting for 50%. If the subsequent tariffs are really as high as 60% as Trump said, then the impact on China's indirect exports will be between 5 million and more than 10 million tons.
At present, this tariff policy has little impact on China's direct exports. Considering that the proportion of China's direct exports to the United States is not large, there may be a rush to export in the short term, and the export volume will increase. However, in the long run, as the number of subsequent anti-dumping review cases is expected to increase, the volume of 're-export' trade in the market will decline.