Analysis of the Impact of the U.S. 40% Circumvention Tariff and Expanded Steel & Aluminum Tariff List on China's Stainless Steel Industry

1. Overview of U.S. Tariffs Since July 2025

In late July, the U.S. significantly raised tariffs on downstream stainless steel imported products from 25% to 50%, aiming to stimulate domestic capital investment in the stainless steel industry.

During the economic and trade negotiations between China and the U.S. in Stockholm, Sweden, it was decided to extend the tariff suspension period for an additional 90 days.

On August 1, an executive order imposed tariffs ranging from 10% to 41% on 69 economies, including the EU, Japan, and Southeast Asian countries. The new tariffs took effect at 12:00 AM Eastern Time on August 7, though some countries negotiated delayed effective dates until October.

This executive order explicitly included the "40% circumvention punitive tariff" clause.

On August 19, the U.S. Department of Commerce announced that 407 product categories would be added to the steel and aluminum tariff list, subject to a 50% tariff rate. The U.S. Department of Commerce confirmed that the new tariffs took effect on Monday of this week, significantly expanding the previously announced scope of tariffs on key commodities.

The new list covers a wide range of products, including wind turbines and their components, mobile cranes, railway vehicles, furniture, compressors, and pump equipment—products either made from or containing steel and aluminum components.

In summary, the extension of the tariff suspension period for 90 days has temporarily alleviated short-term export pressures. The tariff adjustments since August have not directly targeted Chinese stainless steel materials. Among the 407 product categories, only a few items are affected, such as refrigerated containers, containers, and mufflers and exhaust pipes for motor vehicles. Most household appliance products remain unaffected.

Therefore, the U.S. currently imposes a 45% import tariff on stainless steel materials (excluding pipes, flanges, and fittings) and kitchenware imported from China. Stainless steel sinks and basins, machine-use strip, other woven fabrics, pipes, flanges, and fittings are subject to a 70% tariff. Other products (partially made of stainless steel) are currently subject to a 50% tariff (including the 20% tariff from 2018).

2. Significant Increase in Exports to Southeast Asia, Circumvention Trade to Be Affected

In recent years, many Chinese processing factories have relocated to Southeast Asia. Additionally, after Vietnam lifted its anti-dumping measures on Chinese cold-rolled stainless steel coils in November 2024, China's exports to Southeast Asia have increased significantly.

In July, China's stainless steel exports rose, with most varieties experiencing slight growth. This was mainly due to the temporary relief from export pressures during the U.S. tariff exemption period, coupled with delivery to mitigate potential tariff policies. At the same time, to avoid possible Section 232 tariffs, Chinese producers and exporters increased exports to Southeast Asia for circumvention purposes.

In July 2025, China's exports to Southeast Asia reached approximately 126,000 tons, an increase of 16,300 tons month-on-month (accounting for 62.1% of the total export growth), a growth rate of 14.8%. Year-on-year, exports increased by 19,800 tons, a growth rate of 18.5%.

From January to July, the cumulative export volume to Southeast Asia was about 817,800 tons, an increase of 180,700 tons year-on-year (while China's total stainless steel export growth was only 141,000 tons), a growth rate of 28.4%.

The explicit inclusion of the "40% circumvention punitive tariff" in the U.S. executive order will directly impact China's export model of using Southeast Asian countries for circumvention.

Future attention will be needed on how the U.S. determines rules of origin, whether it will raise compliance requirements for declarations, and the enforcement of reviews and penalties for corporate violations.

3. Decline in Exports of Steel-Related Products to the U.S. Due to Tariff Disruptions

1. Overall Exports of Steel-Related Products Increased, While Exports to the U.S. Declined
As a major downstream sector of stainless steel, household appliance exports account for a relatively high proportion.

While the export volume of household appliance-related products increased year-on-year, exports to the U.S. declined due to tariff impacts. Among these, thermoses experienced a noticeable decline.

In April and May, due to high tariffs, Yongkang's thermos/business was already affected, with orders for exports to the U.S. largely suspended, resulting in a more than 50% decline in orders.

As shown in the figure, from January to July 2025, China's thermos exports to the U.S. accounted for about 24.8% of total thermos exports. Affected by tariffs, exports to the U.S. declined significantly, with only 200 million units exported during this period, a year-on-year decrease of 38 million units, a decline of 15.7%.

Similarly, coffee machines, which have a high export share to the U.S., were also significantly affected. While China's global exports showed a slight increase, exports to the U.S. declined sharply. From January to July, exports to the U.S. were about 12.62 million units, a year-on-year decrease of 3.24 million units, a decline of 20.4%.

2. Decline in Exports of Steel Products Mainly Due to Reduced Exports to the U.S.
The proportion of China's household appliance exports to the U.S. is relatively high, reaching up to 25.2%. The decline in exports is largely due to reduced demand from the U.S., with year-on-year declines in exports to the U.S. accounting for 68.24% to 171.37% of the total export decline from January to July.

As shown in the figure below, exports of the four products to the U.S. were significantly affected by tariff policies, with noticeable declines. However, orders recovered somewhat after the announcement of the high tariff suspension policy.

4. Conclusion

Southeast Asia, the region with the highest growth in stainless steel exports, remains affected by high tariffs. Although tariffs are currently suspended, future uncertainties remain. Additionally, the 40% circumvention punitive tariff makes it difficult for businesses relying on circumvention trade to reduce costs, as profit margins are already thin.

The newly added 407 product categories subject to a 50% tariff rate do not extensively cover stainless steel materials or products that heavily use stainless steel, with only a few items included. Thus, the impact of this measure is relatively limited.

However, given that current U.S. stainless steel prices are significantly higher than international market prices, Chinese exports to the U.S. may still hold some advantage even after tariffs (around 50%). The actual impact of the above policies on China's stainless steel and related derivative exports may be lower than expected. Nevertheless, due to weak global demand and strengthened trade protection barriers, export challenges remain significant.

If the U.S. imposes high tariffs in the future, as it did in April, it will inevitably affect the export of stainless steel products and related derivatives.