Chinese president’s visit holds Iron Range implications

Chinese head of state Xi Jinping and first lady Peng Liyuan arrive in Indonesia for the 2013 Asia-Pacific Economic Conference. (PHOTO: APEC 2013, Flickr CC)

Chinese President Xi Jinping arrives in Florida today to meet with President Donald Trump at his Mar-a-Lago golf resort. This is the first meeting between these leaders of the world’s two largest economies, and the stakes are high.

First of all, new nuclear saber-rattling from Chinese ally North Korea threatens the Pacific region. Reports from within the reclusive dictatorship show a desperate North Korean government increasingly willing to use force.

Economically, the two nations are at a crossroads. President Trump raised the trade imbalance between the U.S. and China during the campaign, but there are more specific economic issues as well. Most notably for readers here, the matter of Chinese steel.

The sheer size of China, and the fact that its still developing massive infrastructure, make it not only the world’s biggest customer for steel, but also the world’s biggest producer. Like any economy, China is subject to the ups and downs of global finances and supply. When they are running at full, China produces a surplus of steel, which they then sell on the open market. Because the Chinese state owns the steel mills, they can sell product at a much lower price.

From 2015-2016, a glut of foreign steel coming to the United States reduced demand for American-made steel. This caused many Iron Range mines to idle their operations. Some stayed down for a few months, but others — like Keewatin Taconite — remained closed for more than 18 months.

Foreign steel tariffs implemented by President Barack Obama’s Commerce Department last year spurred a turnaround in American iron mining and steel. President Trump’s election, and the promise of big corporate tax cuts, has inflated iron and steel with a sense of optimism. But these efforts were aided by a slowing economy in China, which caused massive layoffs across parts of China and less supply.

China is now emerging from their downturn, albeit slowly. So what happens when their steel industry is back up to full capacity?

A group of eight U.S. Senators sent Trump a letter asking him to hold the line on Chinese steel tariffs. The signers includes Minnesota Sens. Amy Klobuchar and Al Franken.

“You have consistently reaffirmed your commitment to supporting steelworker jobs, and Chinese steel dumping is a major contributor to American manufacturing job loss. As senators from leading steel and iron ore producing states, we have seen firsthand how this steel dumping has displaced American steelworkers,” the senators wrote to Trump. “We hope that you will continue to strongly enforce our trade laws. In addition to building on the progress that has been made thus far, we respectfully urge you to make it clear to President Xi that Chinese steel dumping and illegal trade practices are unacceptable.”

Right now Iron Range miners feel pretty good. Most are optimistic about the next few years, at least. But this week’s meeting in Florida between Trump and Xi will set the tone for a high stakes trade negotiation.

The truth is that Americans seek the lower prices that China’s imports provide. Efforts to back off of global trade will have consequence. First, for international diplomacy, but also at the cash register. Trump started his administration with tough talk on Chinese trade, but has mostly remained silent on the topic since. Most analysts predict the two leaders will take a safe approach to this meeting in order to establish report for future negotiations.

These days, however, predictions like that are often wrong. Meanwhile, I found this perspective looking at the meeting from the Chinese point of view to be fascinating.

On the subject of China, I’ll be commemorating this meeting on Sunday with a front page feature story in the Hibbing Daily Tribune. I’ll share the story of the University of Minnesota’s first Chinese student, Wen Ping Pan. Pan spent most of his life working as a mining engineer in Hibbing. Stay tuned!

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