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The world's messy trade disputes

Nik Martin
March 9, 2018

US President Donald Trump's tariffs on steel and aluminum appear sudden and defensive, but they're part of the complex nature of world trade. DW looks at the main trade disputes dominating the headlines recently.

Chinese steel factory in Beijing
Image: picture alliance/landov/F. Jiwen

Business and political leaders from Beijing to Brussels have warned of a new global trade war following US President Donald Trump's order to raise import tariffs on foreign steel and aluminum.

While aimed at stopping China from dumping cheap metals on the global markets — a tactic that makes other producers uncompetitive — Trump's critics believe the tariffs could backfire, hurting US consumers and businesses — the very things they were introduced to support.

But the billionaire's latest metal adversaries are just an example of the thousands of ongoing trade disputes, many of them running for decades with no solution. And while Washington's trading partners cry foul, they too have imposed punitive measures whenever it suited them.

Read more: Why Congress, not the WTO, is best suited to rein in Trump on tariffs

1. Steel a 'threat to US national security'

Trump is to levy 25 percent penalties on imported steel, aimed at punishing China for its massive overproduction. Although the decision has annoyed some US politicians and shocked Washington's main trading partners, Trump's predecessors also imposed tariffs on foreign steel, including Barack Obama, who hiked by 522 percent the price of cold-rolled flat steel, widely used for car body panels.

George W. Bush raised the tariff on imported steel in 2002, but was forced to roll back the three-year plan barely 12 months in, after US automakers began shipping production abroad so they could use cheaper steel. The European Union was then forced to impose its own tariffs to avoid being flooded with cheap Chinese steel originally destined for the US.

This time, the EU has threatened the US with retaliation, but way before Trump's latest penalties were mooted, the bloc imposed its own tariffs of up to 73 percent on steel from China.

At its end, Beijing previously slapped a 15 percent export duty on steel to prevent its steelmakers flooding world markets, but its producers would sometimes alter their products slightly to avoid the penalty. In December, China said it was removing the tax altogether.

Global outcry after Trump signs new tariffs

2. Aluminum — US jobs disappear in a flash

The US leader is also levying a 10-percent surcharge on imported aluminum, amid overcapacity by Chinese producers. Around half of the world's aluminum is produced by China, but only 10 percent of its exports enter the US, although that figure has grown exponentially recently. America, meanwhile, imports nine-tenths of its aluminum needs, while its own aluminum sector has shed nearly 60 percent of jobs between 2013 and 2016.

The EU levies a 3 to 7.5 percent tariff on aluminum imports. Its leaders are likely to face calls by Europe's own aluminum-producing sector for protection from cheap Chinese exports that would have previously ended up in the US. For now, Brussels has vowed to levy penalties on around 100 US-made goods, including peanut butter, orange juice and bourbon whiskey.

Read more: Opinion: An economic nationalist bully in the White House takes on global trade

3. Iron tariffs don't make the news

While steel and aluminum tariffs have hit the headlines, Washington quietly last month hiked the duty on some imported cast iron products, again citing China's aggressive trade practices. One Chinese firm was singled out for an incredible 110 percent tariff, equal to the difference in price between their products and those of their US competitors.

Despite its surprise at Trump's plans, Brussels has been imposing punitive tariffs on many imported products for years to quash Chinese subsidized metals. In January, the EU imposed tariffs of between 15 and 38 percent on Chinese cast iron products. More than 50 anti-dumping duties are currently in force against Chinese products, including ironing boards and bicycles.

Average import tariffs

4. Uneven penalties on cars

When the EU threatened to reciprocate against Trump's latest tariffs, the US leader vowed to levy additional taxes on European cars, which analysts warned could hurt luxury German and British carmakers the most. The US levies a 2.5 percent tax on foreign cars, while the EU duty is 10 percent. China, meanwhile, charges between 25 and 31 percent on all foreign vehicles and their parts, although this was reduced in 2016. Added to that, a consumption levy on vehicles with large engines, and purchase taxes, means that new foreign cars can often cost 70 to 80 percent more than their Chinese equivalents. Foreign automakers also have no option but to enter 50:50 joint ventures with Chinese partners to be able to operate in the country.

Previously Trump vowed to tax US-based automakers between 15 and 35 percent, if they moved more of their production to Mexico.

Read more: Tesla chief Elon Musk turns to Trump for help on China car tariffs

5. Solar panels and washing machines

The first tariffs of 2018 were imposed by Trump in January against mostly Chinese solar panels, and washing machines from both China and South Korea. The 30-percent levy on solar cells was quickly followed by similar EU measures, and a whopping 70 percent duty demanded by India. The decision was decried by Beijing and environmental groups, who said the tariffs would hurt efforts to tackle climate change. But competitors again blamed overproduction by China, where some firms moved production to Taiwan to avoid paying the duties.

The "washing machine tax" will force a 20-percent tariff on the first 1.2 million washers imported to the US in its first year, and a 50-percent surcharge on any machines above that number. South Korea, whose electronics giants Samsung and LG together sell up to 3 million washing machines in the US, threatened to refer the matter to the World Trade Organization (WTO), to protect their industry.

Chinese worker installed solar panels
China is accused of dumping cheap solar panels on world markets, forcing European and US firms out of businessImage: picture-alliance/dpa/Imaginechina/Gao Yihan

6. Trade war could devastate farmers

American farmers and food manufacturers are anxious about any retaliation by the EU and China over Trump's new tariffs, which are among the top export destinations for US producers. Soybean, wheat and other short-life products which expire before disputes can be settled, are particularly at risk. US firms have benefitted recently from China's tariff cut on many consumer products ranging from meats to whiskey, which it implemented to boost domestic consumption.

Washington and Brussels have been locked in a decades-long dispute over hormone-treated US beef, which the EU banned in 1989. Despite a WTO ruling, the bloc has refused to lift its embargo.  The EU and China have had a similar spat over import quotas of Chinese chicken, which Beijing says were set too low.

Read more: China dismay as Trump signs off steel, aluminum tariffs

7. Plane maker singled out

In September, Washington tried to levy a 300-percent tariff on Canadian aircraft maker Bombardier's C-Series aircraft. Rival Boeing had charged that the jets had been sold to US airline Delta at below production cost. It said Bombardier had received illegal subsidies from the Canadian and British governments. The decision was ruled illegal by the US International Trade Commission (ITC).