US tariffs will have an impact on international steel trade

On February 10, U.S. President Donald Trump announced a uniform 25% tariff on all imported steel and aluminum, revoking previous exemptions for countries like Canada and Mexico. According to the executive order signed by Trump on February 11, the 25% tariff on all steel and aluminum imports into the United States would take effect on March 12, 2024.In 2024, China’s direct steel exports to the U.S. amounted to only 8.9 million tons (accounting for 0.8% of total exports). Even considering potential tariff escalations in 2025, the forecasted export volume to the U.S. is expected to drop below 5 million tons, with limited impact. While the U.S.’s imposition of tariffs on global steel products restricts China’s indirect exports via Vietnam and Mexico, the overall impact remains manageable. In 2024, the U.S. imported 288.6 million tons of finished steel, an increase of 7 million tons (or 2.5%) compared to the previous year. The lowest point of U.S. steel imports since 2018 was in 2020 at 161.4 million tons, followed by 210.4 million tons in 2019. Overall, it is likely that U.S. steel imports will remain above 200 million tons in 2025, with the reduction accounting for a relatively small proportion of global production. Therefore, if the U.S. only imposes tariffs on global finished steel, the impact on global steel demand and China’s steel industry would be relatively limited.Currently, it appears that Trump’s tariffs may not target finished steel but could apply comprehensively to all goods and affect the entire world rather than just China. However, there is considerable uncertainty regarding the timing and extent of these tariff policies. By analyzing the structure of U.S. commodity imports in 2024, we can preliminarily assess the impact of the tariffs on China’s indirect steel exports.In 2024, the total value of U.S. commodity imports reached $3.27 trillion, accounting for 12.8% of the global total; China’s export trade volume stood at $3.58 trillion, representing 14.0% of the global total. As the largest commodity importers and exporters globally, the U.S. imposed tariffs on Chinese goods in the second half of 2018, leading to a decrease in global commodity trade growth from 10.2% in 2018 to -2.8% in 2019, with U.S. import growth falling from 8.4% in 2018 to -1.75% in 2019. Considering that the 2018 tariffs were primarily aimed at China, global trade recovered through supply chain restructuring. However, if this round of tariffs targets the entire world, many affected countries are likely to retaliate with their own tariffs, potentially causing a greater impact than in 2019, clearly affecting global commodity trade.Breaking down the structure of U.S. commodity imports in 2024, the main sources include Canada and Mexico (auto parts), China (mechanical electronics, home appliances), Vietnam (steel), the EU (high-end machinery), and France (aviation equipment). China’s top steel export regions are Southeast Asia (38%), the Middle East (18%), the EU (12%), and Latin America and Africa (15%). Countries like Vietnam, South Korea, and Mexico serve as traditional re-export processing hubs, with the U.S. being the primary destination. Therefore, global tariffs imposed by the U.S. significantly impact China’s high-steel-content products such as home appliances, automobiles, and machinery.From the perspective of high-steel-content end products, the U.S. accounted for 25% of global auto imports in 2024, followed by the EU at 20%. China accounted for 32% of global auto exports, followed by Germany at 15%. The U.S. and China are the largest global auto importers and exporters. In 2024, China’s appliance exports accounted for 40% of the global total, while U.S. imports accounted for 20%. Similarly, China’s construction machinery exports accounted for 35% of the global total, with U.S. imports at 25% and European imports at 20%. Thus, in the trade of downstream steel products, the U.S. has the largest share of imports, and China has the largest share of exports. Although China’s direct exports to the U.S. may not be the highest, they are connected through intermediate bases and supply chain relocation. Consequently, if the U.S. imposes global tariffs, it will significantly impact China’s indirect steel exports. Moreover, increased tariff uncertainty could slow down supply chain relocation, hampering global fixed asset investment growth.In summary, the impact of the U.S. imposing tariffs solely on finished steel is limited, whereas a comprehensive tariff on finished products would have a significant impact. Trump’s tariff policies mainly affect downstream manufacturing products such as machinery and automobiles. Reduced exports of these products could lead to decreased overall steel demand, particularly for flat steel products like hot-rolled coils and medium-thick plates. It is well known that both direct and indirect steel exports played a crucial role in supporting China’s steel demand in 2024. If tariff policies come into effect in 2025, exports will face challenges, intensifying the test for domestic demand. In response, China should adopt a strategy centered on “upgrading domestic demand + diversifying external demand + technological breakthroughs” while remaining vigilant against spillover effects of trade frictions into other areas.