The Drums of War Echo Through Steel's Scrapyard

The fight over tariffs on steel is not just about economics, but also protecting an industry vital to the military.

- David Fickling

A soldier eats wheat and rice. An army eats steel and oil.

That brutal fact helps explain the protectionist angst gripping the global metals trade. US President Donald Trump's 25 percent tariffs on steel and aluminum from every other country on the planet went into effect on March 12. A wide range of steel products are also on the list of goods the European Union will hit with retaliatory levies.

Chinese exports have also been targeted for trade restrictions in recent months in Mexico, South Korea, Taiwan, Turkey and Vietnam.

On one level, this frenzy of trade restrictions is somewhat surprising. For all the public worry about a tidal wave of predatory imports undercutting venerable industrial plants, you have to go back to the Cold War to find a time when a smaller share of the world's steel was traded across borders. In volume terms, global exports haven't significantly increased since the mid-2000s, even as production has grown by half.

It makes more sense if you consider this a spasm driven by politics, rather than economics.

Trade barriers typically start with a complaint from a manufacturer, and steelmakers have been particularly vocal in recent years in calling for more levies on imports. For more than a decade, the Organisation for Economic Cooperation and Development has been obsessing over "excess capacity", arguing that it pushes down prices, drives steel mills into losses, and creates pressure for yet more protectionism to keep them afloat.