Australia’s steel and aluminium industries have been shocked by US threats of import quotas and a renewed risk of import tariffs.
The White House on Friday, Australian time, announced that exemptions from import tariffs granted to Australia and other nations was only temporary, subject to negotiations to be completed by May 1.
And US President Donald Trump’s policy adviser Peter Navarro detailed quota plans in a surprise announcement, telling cable channel CNN exempted nations would be hit with steel and aluminium quotas to prevent non-exempted nations attempting to find backdoor entry points to America.
Major miners and steel producers were already losing ground on the Australian stock market on Friday after US President Donald Trump announced $US60 billion in tariffs on Chinese imports, sparking trade war fears.
Steel exporter Bluescope closed 5.9 per cent lower while iron ore miners BHP Billiton, Rio Tinto and Fortescue all retreated, with the mining sector suffering the day’s biggest losses.
Mr Navarro said every country not facing tariffs would face a quota, although no details of quota sizes have emerged.
“If you don’t put a quota on then any country that can do whatever they want will become a trans-shipment point for any other country.”
President Trump had exempted Australia, Canada, Mexico and other nations from a new 25 per cent tariff on imported steel and 10 per cent tariff on aluminium.
Australia’s peak industry body, AiGroup, called the downgrade of the exemption “deeply disturbing”.
“This on-again, off-again and on-again stuff is no way to treat a serious trading partner,” AiGroup chief executive Innes Willox said.
“Australian business is increasingly concerned by the uncertainty and potential disruption created by these whimsical policy shifts.”
Tony Dixon, chief executive of Australia’s peak steel industry body, the Steel Institute, was surprised by the quotas announcement on Friday and said the implications would not be known until more details emerged.
Mr Dixon said Australia’s prime minister, Malcolm Turnbull, and trade minister, Steve Ciobo, were of the understanding that Australia had been granted an exemption from the steel and aluminium tariffs.
“Quotas have a different dynamic to it: where the quotas fit and what size they are is important, ” Mr Dixon said.
“But until we have some detail, I think it is pointless to make any serious comment.”
The tariffs target the aerospace, information communication technology and machinery sectors.
China has retaliated with plans to impose tariffs on up to $US3 billion of US imports.
AMP Capital senior economist Diana Mousina said Australia would be affected if the US and China – Australia’s largest trading partner – start a global trade war.
“A trade disagreement between the US and China has the potential to negatively effect Australian commodity demand – but this is far from becoming certain.”
Mining stocks and steelmaker BlueScope Steel were sold off sharply on the Australian share market on Friday, with mining the worst performing sector.
Lucas Review market strategist Evan Lucas said trade war worries had spooked investors, as had rumours coming out of Washington that President Trump is considering a tariff policy around manufacturing.
“That would really hit China and Europe, and therefore the steel manufacturers will face big headwinds, particularly if you are supplying steel for car manufacturing,” Mr Lucas said.