Dumping Is Bad

Dumping Is Bad

Considerable media attention has been given to tariffs, and the dumping of steel at below cost.

The Wall Street Journal (WSJ) published the accompanying chart showing steel production and steel imports by country.

In its article, the WSJ focused on the righthand chart, pointing out that only 2.2% of US steel was imported from China.

There was widespread media condemnation of the administration for imposing tariffs on steel imports. The media uniformly said that tariffs would harm our friends and do nothing to deter China from dumping steel onto world markets.

But the lefthand chart tells an important story about China’s dumping steel onto world markets.

Chart from Wall Street Journal

The implications of the lefthand chart were universally ignored by the media.

The countries that bought China’s low-cost “dumped” steel used it to produce products such as cars, farm equipment, and appliances.

When those products are sold in the United States, China’s low-cost “dumped” steel is imported into the United States as part of the car, tractor or appliance, or other smaller product, such as leaf blowers.

A car could have 2,000 pounds of steel; a tractor could have 1,000 pounds of steel; and so on.

Every pound of Chinese steel that’s indirectly imported into the US is a pound of steel that US steelmakers didn’t produce.

Whether steel is dumped directly or indirectly into the United States, it harms the US steel industry.

While there is some question whether US tariffs on Chinese steel will have any effect on China’s dumping its steel at below cost, it highlights the dangers of dumping.

Dumping is bad.

Dumping at below full cost, by anyone, is unfair and ultimately bad for our economy.

But, we are dumping electricity at below full cost into our market, and few people have raised any objections.

In fact, there is considerable support, including by federal agencies such as FERC, for what some of the Independent System Operators (ISOs) are doing when they hold auctions for the production of electricity based on marginal costs, i.e., below full cost. See, The Market for Electricity is Rigged.

Electricity produced by wind and solar is being dumped at below full cost onto the grid by these auctions and forcing nuclear power plants and other producers to close.

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2 Replies to “Dumping Is Bad”

  1. Dear Donn

    I really enjoy your excellent commentary on Energy and I agree with you wholeheartedly that dumping is bad and dumping electricity is worse.

    I fear, however, that your comments on China are quite inaccurate. Of the 831.7 million metric tons China produced in 2017, only 8.8% (73.3 m mt, down from 13.5% in 2016) were exported. Some 53% of Chinese these exports are going purely to neighbouring Asian nations. Of the remaining 47% relatively little ends up cars, trucks etc. that would end up in the US market. Clearly, Korean cars and white goods will use predominantly Chinese steel, but clearly we couldn’t expect them to use US steel, right? There are also 134 trade remedies in effect in 20 countries (e.g. the EU) to stop Chinese cheap imports.

    Clearly, some Chinese products end up in the UK via Korea, Turkey and directly, but they are a more or a trickle compared to the US’s own 81.6 million mt production. So, the Chinese actually get to dump mostly on their neighbours and only a small proportion would ends up in the US. The US steel industry suffers from a number of issues of its own making such as over capacity, which pose a great danger to itself. But we won’t go into this here, I am sure.

    For further info, see here:

    Best wishes,

    • Thanks for an excellent, and thought provoking comment.
      If China produces half of the world’s steel supply (according to WSJ graph), and uses 90% of it internally, it means China consumes 40% of the world’s supply of steel.
      China’s GDP (`$11 trillion) is approximately 13% of the world’s GDP ($80 trillion) so, on the face of it, one would wonder how they would consume 40% of the world’s supply of steel.
      As for the use by S. Korea of Chinese steel, it allows S. Korean products to be produced at lower cost and thereby outcompete with products made in the US.
      The lower cost of a S. Korean made dishwasher could allow it to displace a dishwasher made in the US from steel made in the US.
      This is a complex issue and the purpose of my article was to demonstrate that dumping is bad and disrupts international trade along with the trust that must exist between countries for trade to flow beneficially to all.
      As for the US steel industry, I agree it created some of its own problems.
      A few decades ago the US steel industry was focused on products such as Core Ten steel, while continuous casting and oxygen furnaces were being developed in Europe and elsewhere.