Czech exports to lose Kc4.2bn annually due to US steps

US President Donald Trump signed orders imposing new import duties, 25 percent on steel and 10 percent on aluminium, last night. The tariffs will go into effect in 15 days.

According to Czech Industry Minister Tomas Huner, EU countries are discussing how to protect the European market, including Czech producers. European countries will have to react to the US steps, he said.

The Czech Republic supports the EU in rejecting the US measures. "It is necessary to defend the system of rules of the world trade and to reject unilateral protectionist measures," Huner said. One of agreements of the World Trade Organisation allows countries to offset unilateral protectionist measures, he added."The Czech Republic will insist on adopting only such measures that will prevent further disturbance of the EU market and will not harm the interests of industry at the same time," Huner said.

According to the ministry, the Czech production that will be affected by the US measures does not constitute a high percentage of exports from the steel sector, but for some specific products the US market is significant. This concerns, for instance, tubes for the mining sector, whose exports to the USA make up 70 percent of output, or seamless and hollow pipes, whose exports account for more than 40 percent.

The negative impacts of the potential trade war between the USA and the EU would be felt mainly by companies engaged in the car industry and steel makers, according to a survey conducted by CTK.

Czech steel makers fear that EU markets will be flooded by cheap steel from Asia.

According to the Czech Steel Union, the USA does not present the biggest market for Czech steel makers, as it receives less than 3 percent of their exports. However, the USA is the world's largest steel importer, so all the steel that will be "squeezed out" of the USA will head for Europe, even at dumping prices, the union said.

"This is what we fear because the EU market is of key importance for us and imports to the EU are growing already. The root cause of the problems in the US steel industry consists in the excessive capacity and state industrial policy in countries such as China and Iran. Unfortunately, President Trump is throwing the baby out with the bathwater, solving the problem to the detriment of allies such as Canada and the EU, which do not use unfair business practices," Steel Union head Daniel Urban told CTK.

The Confederation of Industry, too, said the US measure would endanger mainly steel makers in the Czech Republic. Last year, Czech steel producers exported products worth USD200m (Kc4.1bn) to the USA.

According to the biggest Czech steel makers, Trinecke zelezarny (TZ) and ArcelorMittal Ostrava (AMO), the EU should consider introducing protectionist measures, the companies's spokeswomen Petra Mackova Juraskova and Barbora Cerna Dvorakova, respectively, told CTK.

For TZ, the introduction of tariffs on imports to the USA will mean a possible decrease in exports in the amount of mere units of percent, Mackova said.

TZ exports 66 percent (about 1.65 million tonnes of steel) of its output abroad in total.

An overwhelming majority of AMO's output is exported to the Czech Republic and the neighbouring markets, Slovakia, Hungary, Poland, Germany and Austria. A small part is exported to another about 40 countries but exports to the USA are negligible in relation to the firm's overall output, Cerna said.

Another risk lies in the possibility that USA will introduce duties on other commodities, for instance cars, as well.

The Czech Republic's biggest trade partner is Gemany, which assembles products delivered by Czech subsuppliers.

"If the USA introduces duties on cars from Europe, it would have an impact on Czech subsuppliers of component parts for the automotive industry, as one quarter of car exports from the entire EU heads for the USA," Chamber of Commerce spokesman Miroslav Diro said.

"For car manufacturers in Slovakia, the USA is the fourth most important market, with a share of around 10 percent. Czech suppliers of car parts would feel the negative impact of the potential limitation of exports, too," UniCredit chief economist Pavel Sobisek said.

Czech companies exported goods worth almost Kc88bn to the USA last year.

According to the Association of Exporters, Trump probably started a trade war mainly between the USA and the EU, but also among other global producers of both commodities.

"The US President has not probably realised the final impacts of his decision, which may, and most likely will, lead to an increase in costs for the US mining industry. This will be reflected in the price of crude oil and subsequently also the prices of fuel. And the price of fuel influences almost everything. In addition, this measure will precipitate a number of counter-measures," association deputy chairman Otto Danek said.

Source: CTK