It's unclear what China was thinking when it was borrowed all those trillions to quadruple its capacity to make steel, cement and other basic industrial products. There's no record of it checking in with the other countries that have such industries to see if a sudden surge of cheap imports was okay with them.

Turns out that it's not. The US in particular seems to lack a sense of humor where the death of its steel industry is involved:

US hits China and others with more steep steel duties

(CNBC) - The U.S. Department of Commerce has imposed more duties on corrosion-resistant steel imports from China and elsewhere in an effort to protect its industry from a glut of steel imports from around the world.

On Wednesday, the department's International Trade Administration, which has conducted an investigation into the "dumping" of steel products into U.S. markets, said it had found the "dumping of imports of corrosive-resistant steel (CORE) products from China, India, Italy, Korea and Taiwan" by various steel producers that it named within those countries.

As a result, the department said that Chinese corrosion-resistant steel would be subject to a final anti-dumping duty of 210 percent and anti-subsidy duty of between 39 percent and up to 241 percent.

China's low-cost metal producers have been widely cited as the main culprit for a glut in global steel production that has pushed down prices. Last week, the U.S. slapped tariffs of more than 500 percent on Chinese cold-rolled steel, which is used mainly in car production and appliances.

China has been accused by the U.S. and leading figures in the steel industry of "dumping" that cheap steel on to global markets due to a slowdown in domestic demand and a bid to gain global market share at any cost.

China has conducted a 'war' -- not trade -- with steel, experts say.

China's Commerce Ministry said yesterday that it was extremely dissatisfied at what it called the "irrational" move by the United States, which it said would harm cooperation between the two countries, Reuters reported. "China will take all necessary steps to strive for fair treatment and to protect the companies' rights," it said, without elaborating, according to the news agency.

Europe's not amused either:

EU warns China to expect new steel tariffs

(CNBC) - The EU has warned China that it faces new anti-dumping tariffs on steel, amid growing pressure for the west to block Beijing's bid for "market economy status" and greater access to world markets.

Speaking ahead of the G-7 summit in Japan, European Commission president Jean-Claude Juncker declared: "If somebody distorts the market, Europe cannot be defenseless."

The issue of Chinese steel exports will be discussed by G-7 leaders on Thursday against the backdrop of a steel crisis in many western countries, including Britain where efforts are under way to save Tata Steel's UK operations.

Draft language prepared for discussions on the G-7 communique, while not mentioning China, expresses concern about the excess supply of steel around the world and says it has distorted the global market. A Japanese government official said the issue went beyond steel to other commodities as well.

Juncker claimed Chinese overcapacity amounted to double the EU's annual steel production and that it had contributed to the loss of "thousands of jobs since 2008".

"We will step up our trade defense measures," he said. Juncker also said there would be an impact assessment of Chinese steel exports and detailed discussion on Beijing's bid for market economy status under World Trade Organisation (WTO) rules.

China expects to achieve that status in December on the 15th anniversary of its 2001 accession to the WTO, giving it greater access to world markets and making it harder for third parties such as the EU to impose anti-dumping sanctions.

This month, Members of the European Parliament (MEPs) passed a resolution saying China should not be granted market economy status by Brussels, amid widespread pressure from European steelmakers to protect the sector.

And trade wars, of course, = deflation

So what happens to all that Chinese steel that was on its way to the US and EU before slamming into those prohibitively high tariffs? One of three things: Either it's sold elsewhere, probably at even steeper discounts, thus pricing US and EU steel exports out of those markets. Or it's stockpiled in China for future use, thus lowering future demand for new steel production and, other things being equal, depressing tomorrow's prices. Or many of China's newly-built steel mills will close, and China will eat the losses related to this malinvestment.

Each scenario results in lower prices and financial losses somewhere. Put another way, as far as steel is concerned, the world's fiat currencies are rising in value, which is the common definition of deflation. And since steel is just one of many basic industries burdened with massive overcapacity, it's safe to assume that the process which began with oil and recently spread to steel will continue to metastasize throughout the developed and developing worlds. Next up: real estate. See Miami's Condo Frenzy Ends With Inventory Piling Up in New Towers.

"Modern" monetary policy, designed to achieve exactly the opposite outcome (that is, rising prices for real things), will in response be ratcheted up to ever-more-extreme levels -- which in this analytical framework is like trying to douse a fire with gasoline. The result is a world in which past over-investment produces slow growth and falling prices while ever-more-aggressive monetary policy distorts markets beyond recognition and encourages new over-investment in different sectors, which then proceed to follow oil and steel into the deflationary abyss. And so on, until the system collapses under the weight of its own absurdity.

Postscript: Gold and silver can't suffer the fate of steel and oil because humans have been searching for these metals since the beginning of recorded history and have never been able to add more than a few percent to available supplies in any given year. In fact it's getting harder to find accessible deposits, so no amount of currency creation will produce an oversupply. This imbalance between the rates of fiat currency creation and precious metals discovery is why the latter will rise relative to the former as long as current policies are in place.