China's Steel Exports Defy Tariff Headwinds in Record First Four Months of 2025

China’s steel exports surged to record levels in the first four months of 2025, defying escalating global trade tensions and punitive tariffs. Despite a 20% U.S. levy on Chinese steel and retaliatory measures from other nations, exports rose 6.3% year-on-year (YoY) in Q1, reaching 27.429 million metric tons. This momentum, driven by pre-emptive shipments and price competitiveness, masks underlying vulnerabilities as trade barriers and domestic policy shifts threaten to reverse the trend in the coming months.

The Export Surge: Drivers and Data

The January-April period saw China’s steel industry capitalize on strategic opportunities despite adversity. Key factors fueling the growth include:

1. Pre-Tariff Rush: Exporters accelerated shipments in April to avoid new tax compliance rules set to take effect May 1, 2025. These regulations required VAT and consumption tax payments based on domestic sales prices, raising export costs by ~¥300/mt. Port data from SMM showed April departures reached 6.2278 million mt by mid-month, signaling a “rush to export” (see ).

2. Price Competitiveness: Chinese hot-rolled coil (HRC) exports remained $103–$128/mt cheaper than those from India, Turkey, or the CIS in early 2025, despite falling domestic prices. This advantage, combined with weak global manufacturing demand (global PMI dipped to 49.6 in March), lured buyers seeking cost-effective solutions.

3. Weakened Domestic Demand: Slumping fixed asset investment (-9.8% YoY in real estate) and cost pressures in manufacturing pushed producers to prioritize exports. Imports fell 11.3% YoY in Q1, underscoring domestic oversupply.

The Tariff Tsunami: A Double-Edged Sword

While exports surged, trade frictions loomed large. The U.S. imposed two 10% tariffs on Chinese steel in early 2025, culminating in a 20% levy by March. China retaliated with restrictions on U.S. energy and agricultural imports, while nations like Vietnam, South Korea, and the EU launched anti-dumping probes targeting 17.65 million mt/year of Chinese steel. These measures have already reduced China’s export capacity and are expected to worsen in 2025.

Domestic Policy Pressures: Overcapacity and Green Transition

China’s steel industry faces existential challenges beyond trade wars. The NDRC’s 2025 plan mandates phasing out 200 million mt of inefficient blast furnace (BF) capacity to meet carbon neutrality goals. Over 50% of China’s steel capacity is now deemed “stranded” due to high carbon emissions, forcing companies like Baowu Steel Group (600019.SH) to invest in green technologies.

What’s Ahead for Investors?

The near-term outlook is mixed. Analysts project a sharp decline in exports starting May, as tax crackdowns and trade barriers bite. The second half of 2025 could see a further 10–15% drop in exports due to:- Trade Policy Uncertainty: U.S. reciprocal tariffs on Vietnam, South Korea, and others may resume in July.- Domestic Overcapacity: Sluggish domestic demand and stranded assets will pressure profitability unless consolidation accelerates.- Global Demand Downturn: A weakening manufacturing sector (global PMI below 50) reduces import needs.

Conclusion: Riding the Wave, Preparing for the Tide

China’s steel exports achieved a record start to 2025, but the sector’s long-term health hinges on navigating twin crises: trade wars and green transition. Investors should focus on companies with:1. Diversified Export Markets: Reducing reliance on the U.S. and EU.2. Green Technology Investments: Companies like Baowu Steel, which has pledged to cut carbon intensity by 30% by 2025.3. Cost Efficiency: Producers able to maintain margins amid falling prices and rising compliance costs.

While short-term gains may persist, the industry’s sustainability depends on structural reforms. For now, the surge in exports is a fleeting victory—a high-water mark before the tides of trade and climate policy turn.