On March 1, local time, Trump announced an additional 25% tariff on imported steel and a 10% tariff on imported aluminum products. This is his strongest move to date to implement the "America First" trade policy. . Trump's move has been strongly opposed by many countries, and the smoke of trade war is looming. In the next part of this article, we will sort out the trade policies in U.S. history that are similar to the current situation and the market conditions at that time, and analyze how my country may be affected by Trump’s current round of trade protection policies.
What happened in the trade war before 16?
Looking back at history, the current Trump administration’s behavior is similar to that of the Bush administration in 2002. In 2002, the United States filed anti-dumping prosecutions for steel products against 28 countries and regions, including China, France, South Korea, Japan, and Australia, and officially launched "Article 201" on March 20, 2002, imposing an 8%-8% tariff on most imported steel products. 30% import tariff and import quotas on 14 types of steel products. After the United States implemented Section 201, it triggered a chain reaction of anti-dumping and import restrictions in various countries around the world, and Europe's response was particularly strong. Following the implementation of Section 201 of the United States, the European Commission decided to implement anti-dumping measures on steel pipes from some countries and impose additional import tariffs of up to 53.1%. In addition, the EU also announced the implementation of anti-dumping duties of up to 75% on some steel pipe fittings imported from the Czech Republic, South Korea, Malaysia , Russia, and Slovakia. In response to the EU's protective measures, Poland and Hungary are also considering adopting quotas and temporary anti-dumping measures to protect their steel industries. On December 4, 2003, under pressure from global trading partners and the domestic steel consumption industry, US President Bush announced the cancellation of imported steel tariffs that had been in place for more than a year. The European Union also quickly reciprocated and canceled its retaliatory tariffs of up to 100% on some imported products from the United States.
An important reason why industries such as steel and aluminum are prone to trade disputes is that global steel and aluminum production are in a state of relative excess. Looking at steel (Figure 1), since the mid-1990s, except for the economic crisis in 2009, when steel production dropped sharply and market supply and demand were basically balanced, the world steel market has been in a state of oversupply in all other years. In most major countries, the production capacity of steel is higher than the demand. With the domestic market already saturated, competition in steel trade has become fierce. As a result, price wars and quantity wars have frequently broken out in the international steel market, and this has stimulated countries to The steel industry implemented trade protectionist measures, causing a chain reaction. This time, Trump has imposed high taxes on steel and aluminum. He is simply trying to restrict imports to force demand to stay in the country, consume domestic excess production capacity, drive employment and growth in related steel manufacturing industries, and win votes from voters in related industries.
Historically, with the overcapacity of steel production, global steel trade frictions have been continuous, and the United States has always been one of the main initiators. China joined the WTO in 2001. In that year, there were 348 anti-dumping cases filed by various countries (regions) around the world, involving 139 different categories of products. Among them, steel was the largest category of products, with 127 cases, accounting for 36.49% of the total, which was the same as in 2000. There is not much difference from 37.8% in 2018. In steel anti-dumping cases, the United States is the largest prosecution country. In 2001, 44% of anti-dumping cases against steel products were filed by the United States. Data released by the Ministry of Commerce in 2016 also showed that the United States is still one of the main initiators of trade frictions in the steel industry, ranking first together with the European Union and India.
Looking back at the performance of the U.S. market under global trade tensions during the period when George W. Bush activated "Section 201" (from mid-March 2002 to early December 2003), it can be roughly divided into three stages: In the early stages of trade tensions (March 2002 -September), the cloud of trade protectionism initially appeared, there was great uncertainty in the global economic pattern, market risk appetite cooled, and U.S. stocks, U.S. bond yields, and the U.S. dollar index all fell; mid-term (September 2002- March 2003), market risk expectations were basically cleared, and the market was in a wait-and-see state. The U.S. stock index and U.S. bond yields fluctuated at low levels, while the U.S. dollar index continued to fall slightly; in the later period (March-December 2003), U.S. stock and U.S. bond yields Both the exchange rate and the U.S. dollar index rebounded. In March 2003, the WTO stated in its preliminary ruling that the U.S.'s high tariffs on imported Korean steel were illegal. In July, it further ruled that the U.S. measures violated WTO rules, and the WTO intervened. It leads the market to expect an improvement in the trade situation, which promotes the recovery of the stock market, bond yields and the US dollar. The improvement of the economic situation also prompts the Bush administration to stop using "Section 201".
The "America First" trade policy has taken a big step, leading to changes in the rules of the global game.
Trump announced the imposition of high tariffs on imported steel and aluminum, and the "America First" trade policy has taken a big step. On March 1, local time, Trump announced that he would impose a 25% tariff on imported steel and a 10% tariff on imported aluminum products, and these tariffs would remain in place for "a long period of time." The U.S. Department of Commerce launched "232 investigations" into imported steel and aluminum products in April 2017, and submitted an investigation report to Trump in January this year. According to legal procedures, Trump will make a decision on whether or what trade protection measures to adopt before mid-April this year. Trump suddenly made a public statement in advance on the 1st, which surprised the outside world. According to previously released information, the U.S. Department of Commerce proposed three plans to Trump: imposing indiscriminate tariffs on all economies, imposing heavy taxes on key economies while setting import quotas for other economies, and imposing import quotas on all economies. Set corresponding import quotas. Trump's statement that day means that he is leaning towards the first option, which is to impose tariffs on imported products from all economies. This is his most powerful move to implement the "America First" trade policy so far.
Trade protection is the core economic policy under the "America First" proposition. Its essence is that the United States distributes costs to other countries in a beggar-thy-neighbour manner. In the previous daily article "The Game between China and the United States under "America First"", we have already mentioned that in terms of trade policy, the United States has preemptively moved from a "cooperative game" strategy to a "non-cooperative game" strategy, shutting down U.S. import trade. Gate, advocates bilateral trade agreements to replace multilateral trade agreements, opposes the Trans-Pacific Partnership (TPP), and advocates the imposition of punitive tariffs on countries that engage in unfair dumping and subsidies. These actions actually take advantage of the United States' dominant position in international affairs to increase its own interests at the expense of the interests of other countries.
The deeper goal of "America First" may be to change the traditional multipolar world. In the past, it went from multipolarity to G2. Now Trump hopes to create an "America First" interest distribution pattern. With China becoming the world's second largest economy in 2010, and in recent years with the establishment of the Asian Infrastructure Investment Bank, the acceleration of the internationalization of the RMB, and the launch of the "One Belt, One Road" strategy, the G2 pattern between China and the United States in economic and international affairs has become a reality. , the hegemony of the United States has shrunk. In this context, Trump advocates the "America First" theory not to directly improve the international status of the United States, but to find another way to change the rules of global games and affect the current distribution of interests, thereby grabbing more for the United States. Benefit.
Trump's move may boost U.S. inflation and continue to put pressure on the stock and bond markets.
Tariffs and interest rates on steel and aluminum have triggered concerns about a trade war. This, combined with expectations of rising inflation in the past, has caused U.S. stocks to fall continuously in the past week.On February 27, local time, the new Federal Reserve Chairman Powell made his first public appearance since taking office. He stated that he would continue Yellen's path of gradually raising interest rates. He also mentioned that "despite recent market fluctuations, financial markets are still in line with the environment." Adaptable," suggesting that stock market volatility should not be an obstacle to raising interest rates, supported by recent wage growth and inflation data. On February 27th and 28th, the Dow Jones Industrial Average, S&P 500 Index , and the Nasdaq Composite Index all experienced daily declines of more than 1%. On March 1, although the news of high tariffs on steel and aluminum boosted the stock prices of U.S. steel producers, it also squeezed profits for other domestic industries that rely on steel and aluminum as raw materials (such as automobile manufacturing and construction). pressure. At the same time, Trump's move also triggered investors' panic about the US government's global trade war. The three major stock indexes fell by more than 1% for the third consecutive day on March 1. The Dow Jones Industrial Average, S&P 500 Index, Nasdaq Composite Index They fell by 1.68%, 1.33% and 1.27% respectively.
The imposition of high tariffs on imported steel and aluminum may become a driving force for the trend of U.S. inflation to pick up, continuing to put pressure on the stock and bond markets. In the early days of George W. Bush's activation of "Section 201" (March-September 2002), the United States was in the interest rate cutting range (Figure 4), and the market was not sensitive to inflation, although the core PCE price index that the Federal Reserve is most concerned about has increased from March 2002 to March 2002. It rose from 1.51% in March to 2.43% in September, but the 10-year government bond yield fell all the way, from 5.3% in March to 3.97% in September. At present, Trump's introduction of this round of trade protection measures is in the interest rate hike range. Low inflation has been the biggest obstacle to the Fed's previous interest rate hikes. Therefore, the market is also particularly sensitive to the momentum of rising inflation. Imposing high tariffs on imported steel and aluminum will increase the cost of manufacturing steel and aluminum products. The increased costs may eventually be passed on to consumers, causing inflation to rise.
The comprehensive impact on the domestic economy remains to be seen
Trump has imposed high tariffs on imported steel and aluminum, and the direct impact on the Chinese economy may be limited. Although China is the world's largest steel exporter, the United States's share of China's steel imports is very low. U.S. Department of Commerce data shows that from January to October last year, the six major economies that exported the most steel to the United States In order, they are Canada, Brazil , South Korea, Mexico , Turkey and Japan. Steel from China only accounts for about 3% of the total steel imports into the United States. On the other hand, China's steel manufacturers basically rely on domestic supply and demand. In 2017, China's steel exports accounted for about 5% of total production, and exported 1.18 million tons to the United States, accounting for 1.6% of exports. In addition, in recent years, steel production capacity has been reduced. If it continues to advance, it is expected that China's economy will not be directly affected by Trump's move.
However, it should be noted that if other countries begin to retaliate on a large scale and trigger a trade war, the trade dispute will spread to other industries and products, and China may be implicated. Overall, Trump’s move will have a negative impact on the Chinese economy. The impact remains to be seen. The smoke of the trade war is now looming. After the announcement of high tariffs on steel and aluminum, allies such as Canada and the European Union reacted fiercely. Canada said it was "extremely shocked and stunned" by the Trump administration's tariff proposals and would actively discuss countermeasures. The response from European countries was even more intense. According to Reuters reported that the EU has prepared a counterattack plan against the United States. Once the United States formally passes the tariff resolution, the EU will impose tariffs of up to 3.5 billion US dollars on imported products from the United States; this plan was later revealed by an anonymous EU official Officials confirmed and said, "This is exactly the high figure we want to achieve." European Commission President Juncker directly named several American products, including the famous Harley-Davidson motorcycles, bourbon whiskey and Levi's jeans. He said, "We hope to maintain friendly relations with the United States, but we must not let it go."
If U.S. inflation recovers more than expected, on the one hand, the risk of the Federal Reserve speeding up interest rate increases will increase. On the other hand, raising interest rates will put the dollar under appreciation pressure, and The goal of reducing the trade deficit is divergent. Data since the beginning of this year shows that both wage growth and inflation in the United States have picked up. In January, U.S. wage growth reached 2.9%, a new high since 2009. In January, core CPI year-on-year growth exceeded expectations and reached 1.9%.The imposition of high tariffs on imported steel and aluminum may further contribute to the continued recovery of U.S. inflation. The risk of a larger-than-expected recovery in inflation forcing the Federal Reserve to accelerate interest rate hikes deserves vigilance. But at the same time, raising interest rates will put upward pressure on the U.S. dollar index, which is contrary to the Trump administration’s goal of reducing the trade deficit. This means that interest rate increases, exchange rates, and trade policies will restrict each other. (Editor: Liu Rui)
