Trade

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Driven by government subsidies and other trade-distorting government policies, global overcapacity in the steel industry reached 573 million metric tons in 2024. This overcapacity is not limited to any one country or region of the world, as trade-distorting policies and practices affecting the steel industry are utilized in many countries.

One significant source of overcapacity is China, where steel production in 2024 is forecast to exceed one billion metric tons for the fifth year in a row, despite a dramatically slowing demand for steel in that country. As a result, Chinese steel exports to the world have doubled since 2020 and are on pace to exceed 100 million metric tons in 2024, which is more than the total annual U.S. production of steel. But while China is the largest and best-known perpetrator of market-distorting policies and practices affecting steel, it is not the only country pursuing such policies. Over the last 10 years, Vietnam has increased its steel production by 243 percent, meanwhile Vietnamese steel exports to the U.S. have increased by 264 percent since 2014.

The Chinese government is also expanding its unfair trade practices beyond its borders by subsidizing its steel producers in building additional export-oriented steelmaking capacity outside of China — particularly in Southeast Asian countries like Indonesia. From 2010 to 2020, crude steel capacity in the Association of Southeast Asian Nations (ASEAN) region doubled and significant additional capacity expansion is underway, over 80 percent of which is the result of Chinese cross-border investments. In Indonesia alone, steel production has increased 600 percent over the last 10 years, including a recent joint venture between Indian and Chinese steel producers that will substantially increase stainless steel melt-and-pour capacity. The resulting downstream products typically are cold rolled and finished throughout Asia, then designated for the export market. These cross-border subsidies are helping build new sources of unfair trade that will follow the China model, putting American steel companies, our supply chain, our workers, and the two million jobs the steel industry supports, at risk.

Due to existing Section 232 tariffs and Section 301 tariffs on China, as well as significant antidumping and countervailing duties on Chinese steel, most Chinese steel exports do not come directly to the United States. But widespread transshipment of steel through third countries — including key trading partners like Mexico — means these exports still impact the American steel market, as traders and importers pursue schemes to circumvent and evade U.S. tariffs and trade remedy orders. In addition, Chinese steel exports to third countries can displace sales of locally produced steel in those markets and lead to increased exports of third country steel production to the U.S. market.

To address these growing challenges, American steel producers recommend the following trade policy actions:

  • Section 232 remedy on steel imports — Ensure that the Section 232 steel tariff remedy achieves the objectives established in the 2018 Section 232 report, namely that the domestic steel industry operates at or above 80 percent capacity utilization. Absent effective relief under the Section 232 program, overproduction of steel in countries where there is significant government intervention in the steel sector can result in renewed injurious surges in steel imports, threatening the viability of domestic steel producers and U.S. national security. Improvements to the Section 232 program should include:
    • Measures to address the rampant abuse of the existing Section 232 exclusions process by importers, including the outright elimination of General Approved Exclusions (GAEs);
    • A requirement that only steel products from Canada and Mexico that were melted and poured in North America are eligible for duty-free treatment;
    • Reinstatement of the 25 percent tariff and/or downward adjustments in quota and tariff-rate quota levels to account for reduced domestic demand for specific steel products, for example by reducing the quota on oil country tubular goods (OCTG) from Korea; and
    • Expansion of the Section 232 measures on steel to downstream products such as laminations and cores for electrical transformers, automotive exhaust systems, fabricated structural steel and prestressed concrete strands.

 

  • Section 301 tariffs — Expand the China tariffs to apply to all steel originally melted and poured in China, regardless of where that steel is finally processed. By applying a “melt and pour” rule, the Section 301 tariffs will help address the transshipment of Chinese steel through third countries.

 

  • Trade remedy legislation — Enact the bipartisan, bicameral Leveling the Playing Field 2.0 Act, which would authorize the Commerce Department to apply the countervailing duty law to transnational subsidies like those being used to subsidize offshore Chinese steel production, strengthen the antidumping law by ensuring the ability of the Commerce Department to make “particular market situation” adjustments in antidumping investigations in all instances where home market costs or prices have been distorted, set clear statutory deadlines for anti-circumvention inquiries and ensure the countervailing duty law can be applied to currency manipulation by foreign governments.

 

  • USMCA — Update the United States-Mexico-Canada Agreement (USMCA) to strengthen the tools available to prevent the transshipment and circumvention of steel and key steel-containing goods from outside North America through Canada and Mexico, and to further incentivize the use of North American steel in manufactured products, such as automobiles and light trucks.

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