Trade Tariffs Take A Backseat So Far

Over the course of Trump’s presidential campaign, his proposed trade restrictions were a key focal point, and risk sentiment suffered as a result of the uncertainty linked to the issue. However, at the start of the second half of the year, it appears that investors are currently attaching little risk to the potential of such restrictions. Notably, though, it has been reported recently that there might be some tariffs in the 20% range on a handful of imported goods. As such, it is possible that risk sentiment will once again take a tumble as investors start to focus on the issue again.

Steel Imports Set to be Levied

Steel is one of the key goods set to be levied with a tariff. The steel market is the second biggest market in the world after Oil and gas, and in April this year, the US began a “section 232” probe into whether steel imports posed a risk to national security.

Eurofer Fear European Countries Will Suffer

The move is largely aimed at China, which is the top global steel producer, though the European Steel Association (Eurofer) has raised concerns over the likelihood of European countries suffering too. The group says that the proposed US steel tariffs could significantly damage global trade flows and that European countries are exposed because most Chinese steel is already subject to EU regulations.

At the G20 meeting over the weekend, leaders agreed an August deadline for the OECD-led group to compile information regarding steel overcapacity. A subsequent report on possible solutions is then due in November.

High inventories and firmer import pressure saw European steel prices falling 10% in the second quarter after rising around 50% in 2016. China slashed its steel capacity by 50 million tonnes over 2016 and is aiming to cut a further 50 million tonnes over this year. However, the US argues that a large chunk of the cuts simply cover already idled capacity and that the more important issue of unfairly traded steel is still continuing.