EU Steel Inquiry Sparks China's Cost Concerns

China Reacts to EU Steel Subsidy Investigation

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China expressed its concerns on Thursday regarding the European Union's intention to investigate its steelmakers for alleged subsidies, emphasizing the potential disruption to global supply chains and its inconsistency with international trade norms.

Reports indicate that Brussels is contemplating anti-subsidy inquiries into steel producers who are exceeding production levels in various countries, including China. This initiative is part of an agreement with the United States, wherein the U.S. has agreed not to reintroduce tariffs on EU steel and aluminum that were in place during the Trump administration.

He Yadong, a spokesperson for China's commerce ministry, stated, "The Chinese government believes that the actions taken by the European Union may disrupt the established order of international trade. Such practices by the EU can result in increased costs for downstream production, negatively impacting consumers' interests, and may not contribute to the stability of global industrial and supply chains."

The Financial Times reported earlier this week that the EU is planning to formally announce this investigation during the upcoming meeting between U.S. President Joe Biden, European Commission President Ursula von der Leyen, and European Council President Charles Michel on October 20.

During trade discussions in Beijing last month, He Lifeng, China's top economic official, urged EU Trade Commissioner Valdis Dombrovskis to exercise restraint when considering the use of trade remedy measures. Meanwhile, the European Commission has recently initiated an inquiry to determine whether punitive tariffs should be imposed to safeguard EU producers against cheaper imports of Chinese electric vehicles, which are alleged to benefit from state subsidies.

Additionally, Beijing has expressed objections to the EU's proposal for a Carbon Border Adjustment Mechanism, which would impose tariffs ranging from 20% to 35% on goods with a high carbon footprint, such as steel and iron ore.

He Yadong reinforced China's stance, stating, "We firmly oppose unilateralism, trade protectionism, and the misuse of trade remedies. We will closely monitor the actions taken by the European side."

The EU has already imposed punitive tariffs on 20 categories of Chinese steel and stainless steel products, along with establishing import quotas, as measures to protect its market until mid-2024. As a result, China's steel exports to the EU have steadily decreased since 2018, now accounting for less than a tenth of EU steel imports, compared to 2015 when they constituted a quarter, as reported by Eurofer, the EU steelmakers federation.

Source: Reuters (Reporting by Amy Lv and Qiaoyi Li)