President Trump’s promise to add 25% tax on steel and 10% on aluminium imports to the US has thus far caused unrest, with emerging market stocks falling to two–week lows amid rumours of a trade war spiralling into a major issue.
So far in South Korea, the third highest importer of steel to the US after Canada and the EU, Dongkuk Steel has fallen over 5% and Posco and Hyundai Steel have fallen around 3%.
Further down the league, the 8th highest importer of steel to the US after the likes of Mexico and Japan, China only accounts for around 8% of steel imports into the US, but its large scale operations has brought down steel prices worldwide. The mainland’s shares dropped 0.8% while Hong Kong took a bigger hit with a drop of 1.5%.
In South Africa, stocks fell 1%, greatly impacted by steelmaker ArcelorMittal whose stocks plummeted 5.5%.
Existing worries regarding the weakness of the US Dollar have been amplified by President Trump’s announcement.
However, this weakness has helped shield emerging currencies such as South Korea’s won and China’s yuan, both of which were around 0.2% despite the fact they were expected to achieve weekly losses.
USDCNH Price Chart
It’s expected that individual countries will retaliate by perhaps targeting specific US products with the hope of making an impact on the US equivalent to the (as yet not formally announced) new duties.
The Industry Ministry for Brazil is considering taking action over the new duties either on its own or with other countries. However, South Korea has stated that it will keep speaking to US Officials until formal plans are settled and announced.
How China will react is clearer – They have already announced a range of new tariffs on US products.
The Head of The World Trade Organisation, Roberto Azevêdo, expressed concerns to members that Donald Trump’s proposal for a 25% tax on steel and 10% on aluminium imports could be very damaging, as it would be “very hard” to prevent retaliatory action and that any trade war, with retaliatory sanctions, could result in a ‘deep’ global recession.