Case Study: US slap China steel importers with five fold tax increase

1. U.S. to slap China steel imports with fivefold
tax increase
Names of participants
Nyoka Loice-Host (Journalist)
Juliet Akwango-Chinese steel representative
Eldi Blaceri-American Steel Co representatives
Enea Dinoshi-Economist
Enock Kasimbazi-Economist

2. Host's introduction
• Washington, U.S. – Chinese steelmakers have reportedly been set steep final import
tariffs of 522 percent on cold-rolled flat steel on May 17 by the U.S
• According to reports, the decision was made after a discovery that products were being
sold in the U.S. markets for prices below costs, and unfair subsidies of 256 percent were
being handed out.
• The taxes, which will amount to more than five-fold import prices, will reportedly apply on
cold-rolled flat steel used in the manufacture of car panels, appliances and shipping
containers.

3. Concept of subsidies explained
• With subsides prices falls from P1 to P2
• Quantity supplied increases from Q1 to Q2
• But the fall in prices and increase in quantity
is not a result of fall of cost of production, so
what this means is that the Chinese are selling
there products below their cost of production.
Effects to the importing country
• Producers (not subsides=unfair competition)
• Consumers ( lower prices, benefit)

4. Negative effects of subsides to domestic producers
• Unfair competition_ China manufacturers were selling steel in America below their cost of
production, this is dumping which is illegal. This is because they are given unfair
subsidies.
• May lead to U.S. steel firms to exit industry, this may cause U.S. firms to run into loses
and exit the industry unfairly, actually this policy aims to drive away competitors before
they can rise the price to match their costs.
• Lose of jobs_ actually the American steel industry has laid off 12000 workers over the
past year because of unfair competition from Chinese steelmakers.

5. Concept of tariffs explained
Price without influence of tariffs
Prices under the effects of tariffs
DD means domestic demand, DS means domestic supply
P means home price, P* means world price
P’ is price + tariffs, WS means world supply
Explanation of the graphs
Reasons for imposition of tariffs
• Counteract dumping
• Protect domestic firms and jobs

6. Do you think the unfair subsides gave you an unfair advantage to your competitors in
the U.S. ?
I think the decision is more political, it’s a strategy to protect American inefficient
industries by kicking the Chinese steelmakers out of the market.
Effects of tariffs
The effects of the tariffs are going to fall more on the consumers
• Consumers (rise in price, decrease in quantity & decrease in consumer surplus)
• Of course with a tariff of 522% Chinese steel makers will import very little or even
run out of business because they can not be competitive.

7. Concluding remarks from everybody

8. If a decision to be revealed by the International Trade Commission on June 30 concludes that
U.S. producers have been fairly hit by the unfair trade, U.S. Customs and Border Protection
agency will be ordered to slap duties on Chinese steelmakers of amounts corresponding to the
dumping margin and subsidy rate found by the U.S. government.
Closing remarks by the host
http://www.sanfranciscostar.com/index.php/sid/244155729
http://www.bbc.com/news/business-36319141