Johannesburg, 23 March 2018 – The broader South African steel industry appears to be caught in the middle of what is playing out to be a nasty bilateral squabble between the United States (US) and China over trade, Steel and Engineering Industries Federation of Southern Africa (SEIFSA) said today.
In what appears to be a prelude to enhanced trade wars, the US President Donald Trump yesterday signed a proclamation that will implement new trade tariffs on China, under the 301-trade action plan. The section 301 action plan complements the previously triggered section 232 action plan instrument and gives substantial power to the US president to correct unfair practices or trade against the US.
“Based on the utterings of the US President last night, it is now becoming very clear that South Africa and other developing countries are just pawns in a proxy trade war between the US and China. Given the President’s strong view that a group of countries have been put together to take advantage of the US, there is no doubt that the Americans are using protectionism as a weapon to threaten and intimidate certain countries or a bloc of countries to dance to their tune. The import tariffs of 25% on steel and 10% on aluminum products initiated under section 232 action plan on the basis of safeguarding US national security, are due to come into effect today. Early indications are that the European Union, Argentina, Australia, Brazil, Canada, Mexico and South Korea, will be temporarily exempted,” SEIFSA Chief Economist Dr Michael Ade said.
The potential exemption of these countries considered as either friends, allies or key US trade partners, from the steel and aluminum import tariffs, with the exception of Japan, is regarded as a strategic move by the US to isolate China. The decision seems to be largely driven by personal incentive, non-altruistic norms and geo-political motivation between the US and China. In the initial list of 12 countries including Brazil, China, Costa Rica, Egypt, India, Malaysia, Russia, South Korea, South Africa, Thailand, Turkey and Vietnam, that were identified, only Brazil has been explicitly mentioned as the country to be possibly granted an exemption. African countries like South Africa and Egypt comprising part of the original list of 12 countries have not been earmarked for a possible exemption. The South African government is still locked in negotiations with the US government for a possible exemption and is also actively involved in finding solutions through the Steel Working Group of the G20 group of industrialised nations.
Dr Ade cautioned that the situation may even be dire for China once the import tariffs on steel products also become effective. China has resolutely opposed what it terms the US unilateralism and protectionism. It’s ambassador to the US yesterday promised a Chinese retaliation on US agricultural products including soya bean, should the route of bilateral discussions prove to be unsuccessful. The tension between the world’s two massive economies may well lead into a trade war with negative knock-on effects on the global economy, also negatively affecting employment and growth. The world economy and commodity prices have just shown signs of obvious recovery and a trade war will further compress prices and harm the global economy.
“While the world anxiously awaits China’s response to the US trade restrictions within the next 15 days before the proclamation becomes effective, there is no denying the fact that the ripple effect of a belligerent tit-for-tat response from China will be huge on the global economy,” concluded Dr Ade.
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