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China's Commerce Ministry is upset over a massive duties increase on imports of corrosion-resistant steel. The U.S. Commerce Department announced a duty of 450%, up from 256%, on flat-rolled steel. The steel in question is typically coated in zinc or aluminum to extend its useful life.
These duties are categorized as "anti-dumping" and "anti-subsidy." Dumping is the practice of exporting a product to another country at a price either below the price charged in its home market or below its cost of production. It is considered to be a type of predatory pricing with the goal of increasing market share in a foreign market or driving out competition. Some foreign countries subsidize certain exports, which injures domestic producers in the importing country. Therefore, anti-subsidy duties, or countervailing duties, are trade import duties imposed to neutralize the negative effects of these subsidies.
American steelmakers have recently endured one of their worst downturns ever. These domestic producers now rely on this tariff protection in the midst of a weak market. The oil industry is a large consumer of steel, and the decline of oil prices combined with an increase in Chinese exports has deflated steel prices around the world.
Chinese authorities assert that they are not dumping. However, the Chinese steel industry lost $10 billion in 2015, which is believed to be a clear indication of pricing below cost. They also exported more steel last year than any other country, with their prices usually 20% to 50% lower than the closest competitor.
The question remaining is how this most recent protectionist action will affect future negotiations between the two largest global traders.
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