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About Commodity Insights
17 May 2024 | 18:36 UTC
Highlights
China opposes US's hike of tariff rates on Chinese goods
China's exports of steel, aluminum, lithium batteries have lower share
China on May 15 firmly opposed a move by the US to hike tariff rates on certain Chinese steel, aluminum and energy transition products, however, industry sources told S&P Global Commodity Insights that the tariffs may not have substantial impact on Chinese exports at least in the near term.
China is strongly dissatisfied with the US action of imposing additional tariffs against certain Chinese products, a spokesperson for China's Ministry of Commerce said.
The US said May 14 it was raising tariffs on some steel and aluminum products to 25%, citing China's "unfair" policies that were harming American workers and businesses.
The tariffs also targeted critical minerals and lithium-ion batteries meant for electric vehicles and other usage, with the US Trade Representative saying concentration of critical minerals mining and refining capacity in China has left US supply chains vulnerable and clean energy goals at risk.
However, China's exports of these commodity products to the US have a smaller share of the country's total exports.
Share of China's exports of finished steel to the US is below 1% of its total exports, while aluminum product exports account for around 4% of the total, according to Chinese customs data.
China might turn to a re-export route through a third country to lower the tariff impact for commodities that account for a smaller share in exports to US, sources said. The impact could be larger if US authorities ask imports to be traced to the source, they added.
The US move to hike tariff rates on China's lithium-ion battery industry would not have had a substantial impact so far, China-based market participants said May 15.
China's lithium-ion battery exports to the US reached 224,153,357 units in 2023, accounting for 6.2% of China's total exports, according to Chinese customs data.
Meanwhile, China's exports of electric vehicles to the US also form a smaller number, with about 73% going to Asia and Europe, according to the China Passenger Car Association.
"I don't think the impact is significant, as the US is not a big market for China EVs to begin with," said a lithium miner. With regards to graphite Inflation Reduction Act (IRA) compliance, they're also highly dependent on China, so it's hard for them to totally exclude the country, he added.
For aluminum and steel, the impact of the tariff hike was also seen to be limited on Chinese exports, according to sources.
China's exports of aluminum products to the US have already seen a significant decline since 2018 due to anti-dumping and countervailing investigations, the sources said. In 2017 the US was China's largest export destination for aluminum products.
China exported 236,000 mt of aluminum products to the US in 2023, accounting for 4.5% of China's total exports, according to state-run research agency Antaike.
China does not encourage exports of primary aluminum, as its production process is regarded as energy intensive, sources said.
The country also resumed a 30% export tax on certain alloy products containing aluminum, deterring higher exports of aluminum.
"The proportion of China's aluminum exports to US is not high," the China Nonferrous Metals Industry Association said May 15 in a statement.
China's aluminum exports did not cause any "harm" to the US and only benefited downstream customers, which also encourages healthy development of the global aluminum industry, the association said, asking the US to remove the tariffs.
Meanwhile in steel, China's weak domestic demand due to an ailing property sector has been forcing the industry to ship steel to global markets.
China's steel exports reached a seven-year high in 2023, marking a 40% year-on-year rise, according to customs data. But the share of exports to the US was less than 1% of China's total finished steel exports.
"We haven't exported to the US for a long time due to high tariffs...I don't think China's steel exports to the US could increase this year," a steel mill source said.