Here is a story to make Donald Trump’s blood boil: not only has China been dumping its excess steel in world markets, roiling the U.S. steel industry, it has apparently been cooking the books while it pledges to reduce overcapacity. Financial Times:
China’s cuts in steel capacity last year primarily targeted mills that were already idle, doing little to reduce the exports that have fuelled trade tensions or address the blight of toxic smog, a study has found. Beijing has trumpeted its success in shutting up to 85m tonnes of capacity in 2016.
However, only about a third of that was producing steel, and the closures in operating capacity were outpaced by new plants or mills that restarted as prices rose, according to the study commissioned from consultancy Custeel by environmental campaign group Greenpeace.
Strong Chinese steel exports as domestic consumption peaks have stiffened opposition in Brussels and Washington to recognising China as a market economy under World Trade Organization rules — a status that would make it more difficult to bring anti-dumping cases. Beijing has countered by defending its efforts to cut excess capacity.
Much of Donald Trump’s appeal lay in his message that China was ripping the United States off—that the global trade agenda implemented by past administrations was being exploited by canny actors in Beijing to sell out the American worker. One need not count Trump as an economic sophisticate to concede that he does have a point, and the ongoing Chinese steel saga is exhibit A.
The Chinese steel glut has been a running story for some time now, but the Greenpeace report suggests that Beijing is not acting in good faith to fix the problem, instead fudging the numbers in a disingenuous effort to achieve market economy status in the WTO. And that is a potent illustration of a common Trump talking point: that efforts to integrate China into a rules-based trade order have instead allowed it to game the system, growing rich at the expense of the U.S. while reaping the benefits of the international trade order established by Washington.
Stephen Bannon was once quoted as saying that “The globalists gutted the American working class and created a middle class in Asia.” The 2016 election proved that Trump could channel such grievances into a powerful political force. Trump is not the first politician to care about China’s trade practices; both the Bush and Obama administrations flirted with protectionist impulses and even imposed tariffs on Chinese steel. But Trump was the first to fully embrace protectionism, and gestures like the Carrier deal show that he intends to make high-profile actions to show his support for U.S. workers. If Trump hopes to take Beijing to task for unfair trade practices, then—and everything from his inaugural address to the composition of his trade team suggests that is the case—China’s steel industry could become an early target.