about 2 years ago
No image


By Ruma Dubey

Trump has unleashed a war!

The world aluminium and steel makers are raving mad and they too are getting their arsenal ready to strike back. Talk about war and one emotion which dominates the mind is fear; yes, there is real palpable fear that this trade war unleashed by Trump will grow into something much more bigger, threatening the very concept of globalisation. Many have already decried that Trump is taking back the world, obliterating all steps taken by mankind to make this into a flat world.

Taking protectionism to a step higher, the Trump administration might as early as next week impose a stiff 25% tariff on steel and 10% on aluminium.

Today, the BSE Metal Index is painted a deep hue of red. USA is the biggest importer of steel and total exports from India to USA is only around 2%. The impact might not be debilitating but the fear hounding the traders is that because of this development, shipments from other countries heading to USA might now end up getting dumped in India. This dumping is what could cause a huge dent on Indian steel industry.

To counter this threat, India might have to act swift with its own inti-dumping duties what with current minimum import price of steel quoted so much more lower than the current market rates. Thus if margins of Indian steel makers is to be protected, India will have to hike anti-dumping duties and protect the domestic industry.

So the word “protect” is what all will now use to retaliate against this tariff war. Naturally, every leader wants to protect the interests of his country and people first and if it demands, imposing trade tariffs, so be it!

Why is the US doing this? Trump has time and again said that he will do what it takes to fight Chinese policies that affect American employment. In that perspective, between 2000 to 2016, 51,400 American steel workers lost their jobs, with steel jobs contracting 35% since 1998. In aluminium, between 2013 and 2016, 58% employment was lost.

Trump has also said that these tariffs are being proposed because it poses National security for the USA!!! That’s one of the main reasons cited by Trump for invoking the strong Section 232 to impose this trade tariff. National security? Apparently with USA being the largest importer of steel in the world and when steel is used in over 10,000 military products, the need to protect the nation and the domestic steel industry. This argument holds no water at all because, as pointed out by some experts,  U.S. defense industry purchases less than 5% of domestic steel output, around 1% of domestic aluminium output and only 3% of the total steel made in the USA is used for defense or homeland security. Also threat due to imports is meaningless as Canada, its best friend, is USA’s single biggest supplier, along with Brazil, Japan, South Korea and Mexico- all allies. Chinese exports to USA are just 4% of total steel imported by USA; so it is not dependent on China to feel any threat. In fact the most usage of steel in USA is in construction, automobiles and energy.

China, which is the largest steel maker in the world could retaliate; it has stated that it would take "necessary measures" if its economic interests were hurt. European Union, which is the second largest exporter of steel to USA after Canada, stated that it has been considering for long a 25% tariff on $3.5 billion imports from USA like Levi’s jeans, Harley’s and Bourbon whisky. Brazil, Mexico and Japan have also said that they will take retaliatory steps is USA goes ahead with this tariff imposition on steel and aluminium.

Within USA itself, apart from the steel and aluminium industry not many are happy with this move of Trump and fear that this could jack up cost of living for Americans, in fact cause more job losses if other trading countries retaliate.

What needs to be addressed is actually the build up of excess capacity of steel; that is at the root of al this talk of trade wars. If all global leaders could sit and try to resolve to improve steel consumption, bring some balance between demand and supply, such trade wars would not be required.

No one wins in a war; it is only about who gets hurt the least.  And in trade wars, there are only losers.

Popular Comments