New U.S. steel tariffs, set to take effect on March 12, are poised to disrupt a multi-billion-dollar transshipment trade that has allowed Chinese steel to reach the U.S. market via third countries. This move threatens to intensify global competition and deal a significant blow to China’s already struggling steel sector.
Since U.S. trade barriers in 2016 and 2018 made direct Chinese steel exports to the U.S. uncompetitive, mills in countries like Vietnam, Mexico, and Brazil have been importing cheap Chinese steel, processing it, and exporting it to the U.S. However, President Donald Trump’s 25% steel tariff will severely hamper this trade, according to China’s leading steel consultancies. This could impact nearly 10% of China’s steel exports, worth approximately $7 billion annually.
With this steel now likely to flood global markets, already saturated with Chinese supply, a new wave of protectionism is emerging. Countries like Vietnam, South Korea, and India have already announced or are considering new tariffs on Chinese steel, further squeezing China’s export opportunities.
China’s steel sector, which relies heavily on exports to offset weak domestic demand amid a prolonged property crisis, faces mounting challenges. A Chinese steel trader told Reuters that orders for March and April shipments have already dropped by 20-30% compared to the same period in 2024, even before the tariffs were officially enacted.
The White House has specifically highlighted transshipment as a concern, pointing to countries like Mexico and Vietnam as key intermediaries. Last year, U.S. steel imports from Vietnam surged 143.4%, while Vietnam accounted for 11.5% of China’s total steel exports.
Analysts warn that the new tariffs could trigger a global steel trade war, with countries adopting similar measures to protect their domestic industries. This would further erode the competitiveness of Chinese steel exports and exacerbate the challenges facing the sector.