American Companies Respond to Unfair Steel Trade with China

The trade balances of China and the US have long been a subject of intense scrutiny and debate. Recent analysis from the International Monetary Fund suggests a shift in perspective may be needed – one that emphasizes domestic macroeconomic forces over trade and industrial policies. As these global trends play out, US manufacturers like Zekelman Industries and sheet metal contractors are doubling down on the importance of domestic production.

China’s widening trade surplus and the growing US deficit have sparked worries about overcapacity and the potential for a “China Shock 2.0”. However, the IMF argues that the focus on industrial policies misses the larger picture. Macroeconomic fundamentals, such as shifts in saving and investment, are the true drivers of trade balances. In China, a weakening property market and repeated lockdowns have depressed domestic demand, while the US has seen a boost in spending fueled by a growing fiscal deficit.

This has resulted in China’s trade surplus remaining significant as a share of global output, despite being smaller compared to its own economy than during the “China Shock” of the 2000s. The US, meanwhile, has seen its current account balance deteriorate. Importantly, the IMF suggests that these imbalances are largely “homegrown” and require domestic solutions.

For China, this means addressing long-standing issues like the property sector’s drag on activity and the challenges of an aging population. Export-led growth is no longer a viable strategy for the world’s second-largest economy. The US, on the other hand, must tackle fiscal adjustment through measures like tax reform and entitlement changes.

But what of the role of industrial policies and subsidies? The IMF acknowledges they can boost activity in specific sectors and improve competitiveness. However, their overall impact on trade balances appears limited. Transparency issues also hinder a full assessment of their effects. As other nations, including the US, ramp up their own industrial policies, the risk of trade distortions and tensions rises.

The Steel Manufacturers Association and six other industry groups urged House Speaker Mike Johnson to include the bipartisan Leveling the Playing Field 2.0 Act in a package of legislation aimed at countering China’s unfair trade practices in July. The bill would strengthen enforcement of trade laws and address issues like transshipment of heavily subsidized steel products.

“Any legislative package on China needs to address its most dangerous methods of destroying American jobs and industries,” the groups wrote in a letter. “We urge you to support American workers and industry and show China that it cannot simply continue to dodge our trade remedies.”

This complex global backdrop underscores the importance of initiatives like Zekelman Industries’ “Demand Domestic” campaign. The company is highlighting the risks of illegally imported steel products, including longer lead times, quality issues, and the loss of tax revenue. As pressure mounts on electrical contractors, Zekelman is investing in its domestic operations to provide reliable, regulatory-compliant products.

“Domestic manufacturing is important to our country because it supports American jobs, American communities, and American prosperity,” said Barry Zekelman, CEO of Zekelman Industries. “When we bring product from overseas, we’re supporting all of the things that this country stands against. We’re exploiting labor, we’re polluting the environment, and we’re robbing our own communities of the very jobs that they need to survive and prosper.”

The campaign taps into contractor pride and emphasizes the service and support that backs domestically sourced goods. With well-documented problems in the quality of imports and the environmental impact of “dirty steel” manufacturing, Zekelman is positioning itself as a champion of American jobs, communities, and prosperity.

As the US and China navigate their complex trade relationship, domestic manufacturers and contractors are sending a clear message: the strength of American industry is key to economic prosperity and national resilience. By investing in domestic production and advocating for fair trade practices, companies like Zekelman Industries are helping to build a more sustainable future for US manufacturing.