The Indirect Impact of U.S. Tariffs on the Steel Trade Chain

The impact of US tariffs on direct Chinese steel exports to the US is relatively limited. However, some of the major sources of US steel imports are also important destinations for Chinese steel exports. US tariffs on these countries will potentially impact the total volume of Chinese steel exports.

This statement was made by Wang Yingsheng, Vice President of the China Iron and Steel Association, at the 2025 "My Steel" Mid-Year Conference and Steel Industry Chain Collaborative Innovation and High-Quality Development Forum held in Beijing on July 11-12.

Chinese customs data shows that in 2024, China exported 890,000 tons of steel to the US, accounting for 0.8% of China's total steel exports. US customs data shows that the US imported 470,000 tons of steel from China last year, accounting for less than 2%.

These figures indicate that China's direct market share in the US steel market is relatively low. However, the ripple effects of tariff policies on the steel market are gradually becoming apparent through indirect exports.

Wang Yingsheng explained that steel products imported by the United States, such as home appliances, automobiles, hardware, and various small commodities, all fall under the category of China's indirect steel exports. In recent years, China's indirect steel exports have continued to grow, reaching nearly 140 million tons in 2024, a year-on-year increase of 15%.

"Changes in indirect exports will impact domestic manufacturing. If domestic manufacturing exports decrease, its steel consumption will also decrease accordingly, leading to a reduction in domestic steel purchases and affecting the domestic steel market." "The transmission path of this impact is closely related to the global trade pattern.

Wang Yingsheng pointed out that Vietnam was China's largest export destination for steel last year, with China exporting 12 million tons of steel to it. During the same period, China exported 8.1 million tons of steel to South Korea, 3.6 million tons to Brazil, 1.1 million tons to Mexico, and 6.8 million tons to Canada.

These countries also happen to be the top ten sources of steel imports for the United States. In 2024, the top ten steel import countries for the United States were Canada, Brazil, Mexico, South Korea, the European Union, Vietnam, Turkey, Thailand, India, and Japan, with a total import volume of 24.75 million tons, accounting for 85.5%.

"The future trade pattern may have multifaceted impacts on China's steel industry, bringing about many changes in trade flows and development processes." "Wang Yingsheng said.

This impact, stemming from indirect export transmission, is already evident in the shipbuilding industry.

In April of this year, the United States Trade Representative (USTR) disclosed the results of its Section 301 investigation into so-called "unreasonable practices" by China in the maritime, logistics, and shipbuilding sectors. The USTR plans to impose restrictions on China's maritime, logistics, and shipbuilding sectors, including levying fees on ships built in China based on net tonnage or container volume, with annual increases thereafter.

From January to May of this year, new orders for China's shipbuilding industry decreased by 12.3% year-on-year. "Some orders have begun to flow to South Korea." "Wang Yingsheng said.

According to a review by Jiemian News, the US tariff policy on steel and related products has shown a gradual escalation trend.

In March 2018, during Trump's first term, the US launched a "232" investigation into imported steel and aluminum products, and a "301" investigation into Chinese products. Last year, the US further increased the "301" tariffs on Chinese steel and aluminum products.

This year, Trump announced a 25% tariff on steel and aluminum, which was raised to 50% in June. Combined with previous tariffs, the cumulative tariffs on Chinese steel exports to the US have reached 95%.

The previous US "232 tariffs" covered... The steel products covered include air conditioner parts, refrigerator parts, etc. Starting in June this year, tariffs were imposed on eight categories of steel-made household appliances, expanding the scope from parts to complete machines, which will affect household appliances exported to the United States.

From the perspective of the domestic market, the steel market still achieved good results in the first half of this year.

Data released by the China Iron and Steel Association shows that from January to May, the national crude steel output was 432 million tons, a year-on-year decrease of 1.7%. Data from the National Bureau of Statistics shows that during the same period, the total profit of China's ferrous metal smelting and rolling processing industry reached 31.69 billion yuan, a year-on-year increase of 8.6%.

Wang Yingsheng believes that steel... The apparent reason for the year-on-year profit growth in the iron and steel industry is that "cost reduction outweighs price reduction," but the fundamental reason is the significant decrease in crude steel production. "Self-discipline in production control and price stabilization" is the core factor in the industry's profit improvement; that is, the supply side maintained relative self-discipline and restraint, allowing the steel industry to improve its profitability even against the backdrop of overall demand pressure.

However, the industry still faces multiple challenges. For example, there is a severe imbalance between market supply and demand, the strength of industry self-discipline is far from sufficient, some enterprises still have the ingrained mindset of increasing production to win through low prices, and vicious "involution" competition disrupts market order, affecting the continued improvement of industry profitability.

Looking ahead to the second half of this year... In 2018, Wang Yingsheng believed that domestic steel demand would likely continue its downward trend. The role of the construction industry in supporting steel demand would continue to weaken. Manufacturing steel consumption has been the core driver of increased steel consumption in recent years, but some potential unfavorable factors exist. Considering factors such as trade frictions and US tariff policies, the high level of steel exports in the second half of the year may not be sustainable.

In the long term, China's steel demand will remain within a peak plateau range for a considerable period. It is predicted that China's crude steel production will reach 800-900 million tons by 2035, and will remain around 800 million tons after 2050. China will continue to be the world's largest domestic steel market for a long time.