All in the Timing
China Signals New Steel Cuts

President Trump issued a major trade challenge on Friday, announcing a national security investigation into steel imports that could lead to sweeping new tariffs on Chinese steel. Today, as if on cue, Beijing announced new measures to rein in the excesses of its steel industry. Reuters:

Twenty-nine Chinese steel firms have had their licenses revoked as Beijing kept up its campaign to tackle overcapacity in the sector and days after U.S. President Donald Trump said he would open a probe into cheap steel exports from China and elsewhere.

Analysts say the revocations were unlikely to be a direct response to Trump’s plan, but rather a part of China’s reform measures aimed at reducing surplus steel capacity that many estimate at around 300 million tonnes, about three times Japan’s annual output. […]

China’s Ministry of Industry and Information Technology released a list on Monday of 29 firms that will be removed from its official register of steel enterprises. Most have already stopped producing steel, but some had illegally expanded production or violated state closure orders.

On the one hand, Reuters is right to acknowledge that Beijing’s move should not be considered a significant giveaway to Trump: the Chinese were already planning new measures to reduce overcapacity, and they have a history of cheating on their commitments anyway. And China’s official state publications are hardly in a conciliatory mood, instead denouncing Trump’s steel probe as a unilateral, protectionist move that could trigger a trade war.

Still, the timing here seems to be no coincidence. As we wrote about China’s rejection of North Korean coal on the same day as the Mar-a-Lago summit, this appears to be a well-timed goodwill gesture, reflecting the Chinese calculation that it can defuse tensions by offering Trump low-cost symbolic victories that he can claim credit for. And they may not be entirely wrong. In his recent freewheeling interview with the Associated Press, Trump was eager to tout China’s coal ban as proof that he made Xi cooperate on North Korea:

“Look, he turned down many coal ships. These massive coal ships are coming where they get a lot of their income. They’re coming into China and they’re being turned away. That’s never happened before. […] People have said they’ve never seen this ever before in China.”

It remains to be seen whether Trump can be so easily mollified on his signature trade issue, whether a few well-timed announcements about long-planned steel cuts will allow Trump to save face and reconsider punitive tariffs. But China appears to believe that Trump is desperate for symbolic victories for public consumption, and that half-measures may soften his stances on both trade and North Korea.

Your move, Mr. President.

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