Brazilian authorities announced on Monday (June 30) that they would launch an investigation into the alleged “dumping” of certain hot-rolled steel products from China, India, and Indonesia.
Preliminary investigations have revealed ample evidence of China dumping steel into Brazil, causing harm to the domestic steel industry.
For years, Brazilian steel manufacturers have complained about unfair competition, claiming that China has been flooding the Brazilian market with cheap steel. They have urged the government to take more measures to restrict steel imports.
In order to protect its domestic steel manufacturing industry, the United States and the European Union have imposed tariffs on steel manufactured in China.
On June 3 this year, the White House announced on its official website that President Trump, under Section 232 of the 1962 Trade Expansion Act, “will increase tariffs on steel and aluminum imports from 25% to 50%, with the new tariffs taking effect on June 4, 2025.”
The announcement stated: “President Trump is taking action to protect the vital steel and aluminum industries in the United States, which have been damaged by unfair trade practices and global overcapacity.”
On June 7, 2023, the Official Journal of the European Union stated that the EU has imposed anti-subsidy duties ranging from 4.6% to 35.9% on certain imported hot-rolled flat steel products (iron, non-alloy steel or other alloy steel) originating from China. It also imposed anti-dumping duties ranging from 0% to 31.3%.
Yao Yuan Ye, a professor at the University of St. Thomas, stated that in the past, China mainly engaged in dumping steel products in the markets of the United States and other developed countries. However, with the ongoing trade war between the United States and China since 2018, the possibility of China reselling steel to the U.S., especially under President Trump’s administration, has become slim.
He emphasized that the steel industry is crucial for any country and can impact national security. It is imperative for the Brazilian government to address the issue upon discovery, as a mishandling by China may affect Sino-Brazilian relations in the long term.
Ye also pointed out that China’s steel industry has huge production capacity but weak domestic demand, leading to the need to seek other markets. Through connections with BRICS countries, China has been selling steel to nations like Russia and Brazil.
Regardless of diplomatic relations, countries are averse to dumping practices. Ye suggested that Brazil should gradually investigate its local steel industry to determine if prices are non-competitive and if most companies are buying Chinese steel. Such investigations take one to several years to conclude.
He underscored that steel industries are foundational to nations and can impact national security. If China fails to handle the situation properly, it could have repercussions on the China-Brazil relationship.
Ye mentioned that China’s massive steel production capacity and workforce size make it difficult to downsize production without exacerbating unemployment rates. This precarious situation has contributed to a surge in unemployment in recent years.
He highlighted that China’s dumping practices aim to create an irreplaceable dependency on its products in other countries. By eliminating the steel industries of these nations through dumping, China forces them to purchase steel products, maintaining price stability by making Chinese steel the only viable option.
He concluded that overcapacity in many industries within China is rooted in its planned economy. The country’s rapid industrialization over the past two decades has positioned it as the “world’s factory,” with a focus on manufacturing. However, transitioning from labor-intensive manufacturing to the service and finance sectors often leads to economic challenges, requiring countries to innovate and adapt.
For democratic countries, economic issues can be addressed through changes in government or ruling parties. However, in China’s authoritarian system, it is not feasible to hold the regime accountable for economic downturns, making a change in leadership necessary.
Ye emphasized that China’s lack of market regulation and its artificial market adjustments hinder innovation. In contrast to a functioning market economy that balances sacrifices and gains, China’s model leads to stagnation and external dumping as it hesitates to downsize production, fearing rampant unemployment.
He stressed that the overcapacity issue is a result of China’s authoritarian regime and that the best solution lies in a change of leadership. Many countries have democratized during economic transition crises.
In conclusion, these developments underscore the complexities and challenges associated with global trade dynamics, protectionism, and economic transformations, shedding light on the multifaceted issues at play in the international steel industry.