The U.S. Department of Commerce said Tuesday that it would raise import duties on Chinese cold-rolled steel, which is used in automotive manufacturing and construction, by 522%. The move comes in response to allegations that Chinese exporters are dumping their excess output, that is, selling it below cost to cut losses and gain market share. (See also: 5 Things to Know About the Chinese Economy.)
The final dumping margin is now 266%. The United States accounts for just 2% of China's export shipments, according to Reuters. The value of U.S. imports from China was $514 million in 2014, according to the Commerce Department.
China is by far the world's largest steel producer, accounting for 49.5% of global crude steel production in 2015, according to the World Steel Association. It lags behind several countries in terms of exports, however, because it is also by far the world's largest consumer, so that most production goes towards domestic demand.
Chinese demand for steel fueled a 90.4% surge in steel production between 2001 and 2015, but a slowdown in the country's growth led world steel production to decline in 2015, for the first time since 2009. Production decline has not kept pace with demand decline, however, leading to a global supply glut.
This glut is hurting producers across the globe, with the VanEck Vectors Steel ETF (SLX) falling 24% over the past twelve months. The U.S. steel industry laying off around 12,000 workers in 2015. In February, China's minister for human resources and social security announced 1.8 million job cuts at state-owned enterprises in the coal and steel sectors, but did not give a timeframe.
Other countries have suffered too, with the high-profile closure of Britain's largest steel mill, the Tata Steel plant in Port Talbot, Wales, leading to calls for tariffs such as those the U.S. has imposed.
China's Minister of Finance has responded to the increased import duties by saying the government would continue to provide tax rebates to steel exporters, Reuters reports. The announcement was dated May 10, but released after the U.S. increased tariffs.
"The United States adopted many unfair methods during the anti-dumping and anti-subsidy investigation into Chinese products, including the refusal to grant Chinese state-owned firms a differentiated tax rate," the finance ministry said in a statement.
China is aiming to reduce its annual production by 100 to 150 million tons, compared to U.S. production of less than 80 million tons in 2015.