Vietnamese steel firms face wrath of Trump's protectionism drive

U.S. President Donald Trump’s plan to slap hefty tariffs on steel and aluminum imports from certain countries, including Vietnam, is likely to hit local manufacturers.

“If the tariff increase is approved, Vietnamese steel will find it hard to compete in the United States, and face the risk of being removed from the market,” vice chairman of the Vietnam Steel Association (VSA) Nguyen Van Sua said.

Trump's tariffs are based on Section 232 of a 1962 U.S. law that allows safeguards based on “national security”.

The U.S. Commerce Department recommended a steel tariff of at least 53 percent on all steel imports from 12 countries - Brazil, China, Costa Rica, Egypt, India, Malaysia, Russia, South Korea, South Africa, Thailand, Turkey and Vietnam.

The country-specific aluminum tariff option would impose a 23.6 percent tariff on all products from China, Hong Kong, Russia, Venezuela and Vietnam.

Trump has until April 11 to announce his decision on steel import curbs, and by April 20 to decide on aluminum restrictions.

Protesting the plan, Sua said the U.S has not clarified “what are considered impacts to national security,” so the technical barrier is entirely subjective to protect U.S goods.

“The move violates international commitments and WTO rules. If we cannot reach a solution, we could file a lawsuit to the WTO,” he added.

Chinese threat

Accompanied by the tightened U.S. import policy, local steel makers may face fiercer competition in the domestic market, as Chinese products meant for the U.S could flow into Vietnam.

China, the world’s biggest steel producer, accounts for only about 2.9 percent of U.S. steel imports, data compiled by Wood Mackenzie showed. The world’s top steel-buying nation imported a total 35.6 million tons last year.

More of China’s steel may find its way to developing countries such as the Philippines and Vietnam, according to Reuters.

The situation is the same for aluminum. Chinese aluminum producers will be looking for new export markets, and could cause competition for manufacturers in South Korea, Indonesia, Vietnam and Thailand, while tighter margins could accelerate their plans to set up offshore units.

“We believe the fabricators are able to divert their exports to other Asian countries if the U.S. situation plays out as they expect,” Reuters quoted a source at a global trading house in Shanghai as saying.

Cheap Chinese steel could flood the Vietnamese market, raising concerns among local producers. The VSA previously warned that if Vietnam failed to curb massive imports of steel products from China, several domestic steelmakers could go bankrupt.

“As domestic consumption is limited, cheap steel from China is likely to cause local steel firms to cut production capacity or even go bankrupt,” Sua said, urging the Vietnamese government to use barriers to stop Chinese steel imports.

Protective measures

If this decision plays out as Trump intends, Vietnamese firms will increase exports to other markets, like ASEAN and Canada.

Do Duy Thai, general director of Thep Viet Steel Corporation, said ASEAN holds potential for local steel makers, as the market accounted for 70 percent of Vietnam’s steel exports last year.

Vietnam shipped 4.7 million tons of steel in 2017, up 28 percent over 2016, according to the VSA.

Together with enterprises’ effort in seeking new markets, local relevant agencies will take measures to swerve tax hike on steel exports to the U.S.

The Trade Remedies Authority of Vietnam said it will follow the case closely and coordinate with the Vietnam Steel Association and relevant firms and agencies to deal with the issue.

The Ministry of Industry and Trade has asked the U.S government to carefully consider the import restriction to ensure it respects WTO rules and international practices without harming trade development between the two countries, said the ministry.

“The Ministry of Industry and Trade will closely follow the case, and will consider ways to deal with the issue, ensuring the legitimate rights of Vietnamese firms,” it added.

Vietnam shipped 567,000 tons of steel products to the U.S. in 2017, down half from the previous year, according to the VSA, mainly due to tightened U.S. import policies.

Last December, the U.S. Commerce Department slapped steep import duties on steel products from Vietnam that originated in China after finding they evaded U.S. anti-dumping and anti-subsidy orders.

The department said it will apply strict anti-dumping and anti-subsidy rates on corrosion-resistant and cold-rolled steel from Vietnam that starts out as Chinese-made hot-rolled steel.

Vietnamese-shipped cold-rolled steel will face combined preliminary U.S. anti-subsidy and anti-dumping duties of 531 percent, while corrosion-resistant steel will face combined duties of 238 percent - more than enough to shut both products out of the U.S. market.