US-China Trade War Escalation: Disrupts Metal Scrap Industry

The US and China have been engaged in a trade war for long days. This trade conflict raised by the US on China in the view of narrowing the trade deficit. And now, the US president has added fuel to the conflict by doubling the tariff.

Tariff Trembled Global Trade:

The US President Donald Trump has trembled the global trade by imposing a tariff on billion dollars worth of goods from China, EU, and Canada. These countries retaliated by imposing a tariff on thousands of US products. These actions restricted the import of goods and thereby reducing the country’s economy.

Trade Conflict between the Two Super Powers:

The US initially charged a tariff of 25% on $ 50 billion worth of Chinese goods and China retaliated with a tariff on $ 50 billion worth of US goods. Two months later President Trump imposed the duty of 10% on the goods worth of $ 200 billion and China charged with the tariff ranging from 5% to 10% on $ 60 billion worth of the US goods. On May 2018, the US President announced a 25% tariff on steel and a 10% tariff on aluminum imports by stating that the dependence on the imported metals would threaten America’s ability to make weapons. Finally, both the US President Trump and China President Xi announced a truce on December by agreeing not to raise the tariff anymore.  

The US-China Failed to Make a Deal:

On May 10, 2019, Trump escalated the Trade war by doubling the tariff on $ 200 billion worth of Chinese goods from 10% to 25%. He also threatens that he would impose 25% tariff on almost all the remaining goods of $ 325 billion worth that are imported from China. On the actions of the US, China made an announcement that it will raise the tariff on $ 60 worth of US goods which will take effect on June 1, 2019.

US Placed Huawei on its Entity List:

The US administration wants China not to steal US intellectual property and forced their companies to hand over the business with China. This bans US companies from selling technology to the Chinese telecommunication company without the approval of the US government. The US also insisted not to use Huawei technology as it is a threat to them.

China Hit Back by Raising Tariff:

China’s decision to hike tariff on $60 billion worth of the US imports, which came into effect on Saturday, June 1.  The products of 10% tariff were subjected to 25% and 20% and the products of 5% tariff were subjected to 10%. Overall, the total tariff subjected to Chinese goods is US$ 250 billion and the total tariff subjected to the US goods is US$ 110 billion.

Metal Companies Affected in India:    

The top seven metal companies reported that there was a decline in the earnings of these companies in the quarter of March due to the metal price fall. This fall in metal price will make a direct impact on the scrap metal price. The metal companies including JSW Steel, Jindal Steel, Hindalco, Vedanta, Hindustan SAIL, Tata Steel and Jindal Stainless had 8% to 28% earnings decline. The trade restrictions in the US made the affected countries to approach countries like India.

Japan Export to China Dropped:

Japan depends heavily on exports of various raw material to China. Japanese suppliers of components and materials will face lower demand from Chinese producers of US finished products. So this will eventually affect the exports and it puts downward pressure on the economy. Japan faces this export downfall from the month of January to March 2019.

Domestic Demand Hikes the Metal Scrap Price:

The raising tariff would affect the US manufacturing company a have to purely depend on their domestic metal scrap suppliers. The demand for the domestic metal scrap would raise up the metal scrap price. This will eventually make the manufacturer raise the price on their finished goods. The consumers will ultimately have to bear the higher cost. The Trade conflict between the US and China is deepening, whereas China is expected to boost its trade deal with its allies.