China’s steel and iron ore futures fell on Thursday as U.S. plans to impose a higher 25 percent tariff on $200 billion worth of Chinese imports renewed worries over an escalating trade war between the world’s two biggest economies.
U.S. Trade Representative Robert Lighthizer said President Donald Trump directed the increase from a previously proposed 10 percent duty because China has refused to meet U.S. demands and has imposed retaliatory tariffs on U.S. goods.
Beijing said it would hit back if the United States takes further steps hindering trade, including applying the higher tariff rate.
The most active October rebar contract on the Shanghai Futures Exchange closed down 1.2 percent at 4,136 yuan ($607) a tonne.
The construction steel product touched a 5-1/2-year peak of 4,243 yuan on Wednesday following a weeks-long rally fueled by supply restrictions in China as its anti-pollution campaign intensifies.
“As long as tariffs are allowed to metastasize, they do have the potential to do real damage to the global growth story,” INTL FCStone commodity consultant Edward Meir said in a report, referring to the U.S.-China tariff war.
“What that means for commodities ... is that price rallies do not have a real chance of taking root.”
Prices of steelmaking raw material iron ore also slid although coking coal steadied after initially declining. The most-traded September iron ore on the Dalian Commodity Exchange fell 0.9 percent to settle at 476 yuan per tonne and coking coal was flat at 1,192 yuan.
Coke, the processed form of coking coal, ended 2.2 percent higher at 2,349.50 yuan a tonne, after falling as much as 1.3 percent earlier in the session.
Spot iron ore for delivery to China’s Qingdao port fell 2.4 percent to $66.55 a tonne on Wednesday, according to Metal Bulletin.
The U.S.-China trade tensions aside, traders say the continuing smog war in China which has prompted cities to either shut or cut output of industrial plants, including steel mills, would keep steel supply tight, supporting prices.
Average daily steel output by members of industry group China Iron and Steel Association stood at 1.96 million tonnes on July 11-20, down 19,200 tonnes from the first 10 days of July, the group said on its website this week.