In light of Xi Jinping's spirited defense of free trade in Davos yestrday, which implicitly blamed rising protectionism on Donald Trump, here are some revelant facts courtesy of Axiom's Gordon Johnson.

China has been hit with a number of steep, and at times draconian, steel import tariffs from the US in 2015 (when imports into the US from China fell -25.1% YoY) and 2016.

Exhibit 1: China Steel Imports into the US

In fact, underpinning this dynamic, in 2016, or the most recent year on record, steel imports into the US from China dropped -63.4% YoY, or the second largest annual decline ever, and the lowest percentage for China steel imports into the US as a percent of total US imports EVER (Exhibit 2).

Exhibit 2: China Steel Imports into US as % of Total US Steel Imports – Lowest EVER in 2016

Thus, in our view, while there is a strong view that President Elec Trump’s “getting hard on China” stance will be a huge positive for the steel industry, BASED ON THE NUMBERS, we would argue that this was accomplished during Obama’s two-term presidency. Given the acute reversal higher in steel stocks today on comments on overcapacity in China from Mr. Trump’s incoming US Commerce Secretary Wilder Ross, we do not believe this dynamic is well understood by the lion’s share of market prognosticators at present.



To wit, unless more tariffs on Chinese imports are going to drive them into negative territory (at risk of stating the obvious, this is impossible), we see the market’s reaction today as misplaced.



