Steel segment waits to see what Trump will do

However, he is now considering signing a third order targeting countries that dump steel on American shores, specifically China— but there is much concern that the directive could spill over and impact Vietnam.

Here’s what it is all about

The capacity of Chinese steelmakers now exceeds that of the US, EU, Japan and Russia combined and has accounted for more than 75% of the growth in the global industry over the past five years, according to experts.

China cannot possibly use all the steel it produces domestically so it regularly dumps it into other markets, principally the US and EU—which has resulted in substantial closings of steel plants and loss of jobs in these markets.

The United Steelworkers union in the US has estimated the loss of jobs caused by Chinese dumping to be more than 14,500 between January 2015 and June 2016 as a result of dozens of plant closings.

Dumping is when a foreign manufacturer exports a product to another country at a price below what it charges in its own domestic market. Quite often, a dumped product is priced below what it costs to produce.

Dumping such as that from China is alleged to be part of a long-term strategy to capture foreign market share, the idea being that the super low price will put steelmakers in other countries out of business and allow the Chinese government-backed foreign companies to dominate the industry.

Meanwhile the Chinese government, it is supposed, is subsidizing the losses incurred by its domestic steelmakers because the segment creates jobs, which in turn benefits the economy in many other ways that results in net overall improvement in the gross national product.

There is also substantial evidence that some Chinese steel companies have sent products in the past through Vietnam as part of a scam to avoid US anti-dumping duties and that this conduct might be continuing.

Trump’s executive order

What Trump administration staff are telling the media on background is that the proposed executive order would launch a massive investigation by US authorities to see if trade deficits for specifically –  steel and aluminium – are the result of dumping.

What could Trump do to stop dumping

Trump has the power to unilaterally levy a tariff against imports from any country, which literally means he can impose import duties on his own initiative without the approval of the US Congress.

He could also follow through on his campaign pledge to instruct the US Trade Representative to bring cases against China and other countries to use "every lawful presidential power to remedy trade disputes."

No one knows for sure what Trump would do if he signs the executive order, but a likely course of action also includes an option to follow the lead of former US President Ronald Reagan and impose voluntary export restraints on steel such as those imposed by the US in 1984.

Dumping in the US and markets around the globe such as Vietnam by Chinese steelmakers is a major problem — and it is a problem that will not be resolved on its own. US President Trump is going to have to act.

The Vietnam steel segment is waiting to see what the US President will do.