Reports that US President Trump planned to impose a 25% tariff on steel imports and 10% on aluminium sent Wall Street into a spin this week. Foreign governments are threatening to launch stiff retaliatory measures against the United States if they proceed with the proposal, with Canada, South Korea, Brazil and Mexico expected to bear the brunt of the tariffs. The European Commission has declared that Europe would retaliate against the sanctions with tariffs of its own. Canada could be hard hit – last year exports of goods and services to the USA accounted for 12 percent of their entire economy, so a broad-based reaction from US trade partners would be felt there.
But as far as direct impacts go for Australian iron ore exports, and our major export client China, they will barely be noticed, although mining giants BHP and Rio Tinto had already declined for two days before the announcement. The reason other markets were impacted around the globe was because data from the USA, China and Japan this week showed global growth momentum was waning, as China once again attempted to curb its reliance on debt funded infrastructure growth.
China in fact supplies less than 2% of the USA’s steel import requirements, so the new tariffs will only be of a symbolic nature to them; likewise the benefits to the US economy itself will be negligible, because their domestic steelmakers also produce less than 2% of their total demand – which is 97.5 million tonnes annually. Australia need not be concerned with the tariffs per se, although we watch with interest the reactions of our other trading partners in the weeks ahead.
