Albanese government prepares to take on China as trade tensions flare

The Albanese government is bracing for a showdown with China as it considers imposing new quotas and tariffs on cheap Chinese steel, amid a surge in imports across Australia.

Treasurer Jim Chalmers confirmed to The Australian Financial Review on Wednesday that the government will this week order the Productivity Commission to investigate sweeping claims of steel dumping.

Figures now show fabricated steel imports, mostly from China, are approaching 700,000 tonnes a year, leaving local manufacturers under severe strain.

'We all have an interest in making sure we get fair prices for the valuable products and resources that we sell to the world,' Chalmers said.

The Australian Steel Institute is demanding emergency World Trade Organisation safeguards, including a cap of 400,000 to 450,000 tonnes on imports and a 50 per cent tariff on anything above that threshold, warning the sector is at risk of collapse.

'The implementation of Safeguard measures would also prevent the erosion of critical steelmaking assets that represent a substantial long-term sovereign investment,' The Australian Steel Institute said in a statement.

'The Safeguard would support the nation's sovereign manufacturing capability for critical defence projects and help maintain and enhance a skilled Australian workforce by supporting apprenticeships and advanced fabrication trades, encouraging investment in new technologies and training.'

If the Productivity Commission backs the industry's case, Chalmers will then decide whether to trigger new restrictions.

The Albanese Government is considering new restrictions on Chinese steel imports 

The Australian Steel Institute warns that the sector is at risk of collapse without the safeguard 

Such a move risks reigniting trade hostilities after Prime Minister Anthony Albanese spent years trying to repair Australia's relationship with Beijing, following its deterioration under the previous Coalition government.

Australia–China tensions intensified under Scott Morrison, with Beijing slapping steep tariffs and bans on local barley, wine, beef, timber, coal and seafood in response to Canberra's demands for pandemic transparency.

China has already invoked similar WTO safeguards to impose targeted tariffs and quotas on beef from several countries, including Australia, after claims from Chinese farmers that cheap foreign meat was undercutting their own market.

Unlike anti-dumping measures that target specific countries, WTO safeguards apply to all exporters if there's an import surge that threatens domestic industry.

In this case, China stands to be hit hardest, supplying nearly two-thirds of Australia's imported fabricated steel, aluminium and iron.

The clampdown comes as global trade volatility continues after former US President Donald Trump's trade war, and marks another major Albanese government intervention to support manufacturing and keep smelters operating.

The government has poured billions into shoring up Australia's steel and smelting industries, backing facilities that were teetering on the edge due to skyrocketing energy costs and entrenched structural challenges.

A deal to keep NSW's Tomago aluminium smelter running includes taxpayer‑guaranteed renewable energy agreements and concessional finance, with the full federal bill yet to be revealed as talks continue.

Australia would likely face hostility from the Chinese Government in response to the safeguard

Separately, a $2.4 billion federal-state rescue package has been announced for Whyalla's steelworks in South Australia, covering immediate support, ongoing operational funds, and close to $1.9 billion in long-term infrastructure investment.

If Canberra proceeds, it would mark one of Australia's most dramatic trade moves in years and a new flashpoint in its fragile relationship with Beijing, which the government has been keen to claim credit for repairing.