BHP, the world’s largest diversified natural resources company, recently celebrated the 50-year anniversary of its relationship with Japan – the two parties have experienced joint benefits as Japan’s industrialization was enabled by a steady inflow of BHP’s iron ore. During this period, Japan experienced a 1400% increase in steel production per capita, a 4x improvement in post-WWII standard of living, and was the “first non-Western economy to reach wealthy nation status.”  BHP has a vested interest in marketing this story as isolationist governmental policies gain traction globally.
Most trade agreements today are less celebrated. The world’s steel market is arguably “the most distorted industrial market in the world,” and the United States has not protected its own steel industry. Foreign steel producers engage in dumping – the practice of discounting steel in export markets while enjoying comfortable margins protected by subsidies in their home country.  American Iron & Steel Institute Chairman John Ferriola shared his frustration that “China has subsidized the [steel] growth… through grants, low interest loans, [and] free land… simply stated, the Chinese government is a company disguised as a country… waging economic war on the United States”. This results in higher steel supply than demand and lower U.S. steel prices. As a strong symbol of U.S. frustration, the Obama administration levied a 200%+ tariff on China’s cold rolled steel. 
President Trump resurfaced the topic during his campaign and gained political support from “Rust Belt” cities on the promise of protectionist trade agreements. These cities saw large levels of unemployment after low steel prices eliminated their ability to compete globally. Trump emphasized “…they’re dumping steel. Not only China, but others. We’re like a dumping ground, okay?” Steel is needed for defense – helmets, tanks, and rocket fuel – and Trump strongly believes this is not an area to become dependent on foreign sources.  He has suggested in post-election rallies a 45% tariff on Chinese imports that would “rip-up” existing trade deals. 
Currently, China is 41%, or $14 billion of BHP’s earnings. A decrease in China’s steel export ability would create uncertainty in iron ore demand. At the worst, global retaliation from China may cause a decrease in connectivity between Asia and Australia. Since mining is largely a capital intensive, fixed-cost business, lower iron ore prices directly impact profits. BHP’s 2017 annual report details “modest economic growth” in the short-term due to protectionism and a related external financial risk that is “difficult to predict and outside [BHP’s] control”.  BHP chief executive Andrew Mackenzie told the Financial Times that global businesses need a “call to arms”. Mackenzie emphasized that tearing down trade deals will lead to extensive negotiations, decreased market efficiency, and increased geopolitical tension.  Jac Nasser, BHP chairman in 2016, spoke out directly against the tariffs, saying the issue is greater than BHP’s balance sheet since “the whole world will start to be in complete trauma” with guaranteed countermeasures from other countries. 
Mackenzie further emphasized that “free trade doesn’t take jobs on a net basis. It makes them. Big time”.  But with one caveat: labor economists David Autor, David Dorn, and Gordo Hanson emphasized trading with China has not helped the U.S. workforce, but emerging market middle classes. As stated in the abstract, “…employment has fallen in U.S. industries more exposed to import competition, as expected, but offsetting employment gains in other industries have yet to materialize.”  Despite expert economists agreeing that steel trade is unfair and caused unemployment in U.S. steel-making industries, they fear the backlash of the tariffs for the many Americans who are employed by steel-buying industries. 
BHP executives including Mackenzie met with Trump in January 2017 to discuss a wide array of issues impacting the resources sector.  BHP’s strategy of operating “upstream assets diversified by commodity, geography, and market” is their greatest line of defense at mitigating the risk of trade restrictions.  Going forward, BHP needs to continue diversifying their commodity portfolio and actively engaging with foreign governments to encourage both tariff and subsidy free steel trade. If tariffs are enacted, I recommend BHP to actively lobby and file for exceptions. I would evaluate BHP’s relationship with China: by supplying China in one market, did they create a problematic situation in another? How should or can BHP and the community punish unfair trade?
 BHP Billiton, “Japan and BHP’s 50 year relationship.” June 5, 2017. http://www.bhp.com/media-and-insights/prospects/2017/06/japan-and-bhp-50-year-relationship, accessed November 2017.
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 Kehoe, John. “BHP Billiton and Rio Tinto at risk in Donald Trump’s Steel Crackdown.” Australian Financial Review, April 21, 2017. http://www.afr.com/business/mining/bhp-billiton-rio-tinto-at-risk-in-donald-trumps-steel-crackdown-20170420-gvp55d, accessed November 2017.
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 Autor, David H., D. Dorn, and G. H. Hanson. “The China Shock: Learning from Labor Market Adjustment to Large Changes in Trade.” The National Bureau of Economics, Paper no. 21906 (January 2016).
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