Moody’s commented that the amount of steel and aluminum exported to the US usually accounts for less than 1 percent of GDP or exports.
“In Asia, the direct effects on the macro economy will be very small because the amount of steel and aluminum exported to the US usually accounts for less than 1% of GDP or export turnover,” Moody said.
The international rating agency adds, “The direct impact on Asian steelmakers is completely manageable.”
CEO of Japanese steel giant Nippon Steel, the world’s second-largest steel producer, said Trump will “regret” its decision. Last Friday, steel stocks of Asian steel companies under pressure to sell off. Typically, shares of Posco (Korea) fell 3% while Nippon Steel’s shares also fell 4%.
“Even for Korea – with a large amount of steel exports to the US, the level of influence that the Posco and Hyundai Steel companies suffer is quite modest.”
However, Moody’s argues that the impact of the increase in import duties on steel and aluminum depends on the size and capacity of companies that are large enough to reduce costs to offset rising taxes.
Moody’s expects Canada and Bahrain to be the two countries most affected by the tax increase rather than China.
This appears to be in opposition to Trump’s intention to put pressure on China’s economy as he repeatedly accused the world’s largest steelmaker of dumping in the United States. In fact, China is not among the top ten countries exporting steel to the United States (only ranked 11th by the International Trade Administration).
Instead, the tax increase will affect all US allies, including Canada and Mexico. Their steel accounts for 16% and 9% of US imports respectively. Other provisions of the decree, including exceptions, may be issued next week.
Moody said that the export of steel to the United States may cause companies to switch to other markets, so competition will be more fierce.
Experts predict that China will retaliate by raising taxes on imports from the United States, including many agricultural products.
Under the proposed tariff increase under section 232 of the Extended Trade Act of 1962, the United States would impose a 25% tax on steel and 10% on imported aluminum. US imports account for 30% of total domestic steel.
However, Moody warned over the long-term increase in tariffs on steel and aluminum imports could harm global trade, depending on how the countries react and respond.
Source: Duc Quynh / CNBC, ndh.vn