Trade tensions between US and China exacerbated by steel overproduction


Nucor Corp, a massive U.S steel firm, has accused China of economic warfare against the US. John Ferriola, Chief Executive of the company, cites illegal government subsidies propping up Chinese steel companies at the expensive of the industry in the US. China has been accused of selling products at prices lower than production cost, in order to gain a larger chunk of the global market share.

[ Ally Stackhouse | August 25, 2016 | TWS]

China recently committed to gradually begin cutting its excess production capacity, but Nucor has expressed doubts after China set new production records soon after these promises. Even China’s plans to reduce production by 100 to 150 million tons would only have a small impact on an industry that has been estimated to be producing 425 million tons in excess of demand. The US steel market only produces about 100 million tons, as a basis for comparison.

China’s interests are pulled in different directions. If they do not cut overproduction, they risk creating a financial crisis by worsening existing debt. This is a problem affecting a variety of industrial sectors in China. However, cutting production too quickly could result in slowed growth and an upsurge in unemployment. These issues are particularly volatile ahead of leadership changes in China next year.

Trade issues with China have stoked anger in the US presidential primaries, after 15,000 US steelworkers have lost their jobs over the course of the last year and a half. Ferriola has emphasized the role of Chinese trade practices in leading to these job cuts.

These tensions have risen during a crucial time in US/Chinese relations, leading up to the US potentially declaring China a “market economy” in December. In a deal signed with China when they joined the World Trade Organization, the US agreed to update China’s status as a “non-market economy” in 15 years. This change would affect how the US calculates trade tariffs on Chinese imports.

Ferriola has joined voices speaking out against this change in status, emphasizing China’s unfair trade practices, and the dangers of allowing these practices to go unaddressed. According to Ferriola, “They broke those rules, they violated the criteria.” Tensions have also been increased by continued cyber-attacks on US corporations, and the yuan recently falling to a five-year low against the dollar. The US has accused China of restricting access to their market with a variety of regulatory barriers. Economic tension between the US and China will no doubt continue to exert strong influence on the US elections in November.


CPA is the leading national, bipartisan organization exclusively representing domestic producers and workers across many industries and sectors of the U.S. economy.

The latest CPA news and updates, delivered every Friday.


Get the latest in CPA news, industry analysis, opinion, and updates from Team CPA.