Posted on 08 Feb 2022
The U.S. and Japan are set to announce an agreement Monday that will end tariffs imposed on Japanese steel under former President Donald Trump, people familiar with the situation said.
Washington will suspend the 25% levy on incoming steel imports from Japan up to a certain threshold, with anything beyond that still subject to additional charges, according to the people who declined to be identified because the details are private. The solution mirrors the accord that the U.S. reached with the European Union in October that ended punitive measures on as much as $10 billion of each other’s goods.
The truce doesn’t cover aluminum imports, which remain subject to a 10% tariff, the people said. Japan is the fifth-largest source of U.S. steel, according to Commerce Department data.
Japan is the fifth-biggest exporter of the metal to the U.S.
SOURCE: U.S. Commerce Department data, 2019
A spokesman for the Office of the U.S. Trade Representative declined to comment. The Commerce Department and the Japanese embassy in Washington didn’t immediately respond to requests for comment.
The metals dispute started in 2018, when Trump imposed duties on steel and aluminum from the European Union, Asia and elsewhere, citing risks to national security. The EU subsequently retaliated, targeting products including Harley-Davidson Inc. motorcycles, Levi Strauss & Co. jeans and bourbon whiskey.
The U.S. made an offer to Japan to resolve the dispute in December, but Tokyo was holding out for a better deal and had wanted the tariffs to be abolished completely, an official with knowledge of the talks said at the time.
Washington’s proposal to Japan was similar to the deal with the EU, in that a certain amount of steel and aluminum -- based on the historical averages shipped -- will be allowed to enter the U.S. free of duties, according to the people.
In terms of volume, Japan only accounts for about 4% of all steel imported to the U.S., and the 1.1 million tons of imports that the International Trade Administration estimates came from the nation in 2019 represented about 1% of all metal consumed in the U.S.
Still, it’s another domino falling for allied countries receiving exemptions to send steel duty-free to the U.S. market. This is something that makes domestic steel producers uneasy, because they argue it creates a slippery slope that opens the door for those countries with exemptions to ramp up their exports.
U.S. steelmakers also warn that exempted nations can act as pass-through points for metal coming from bad actors like China. They worry that Europe, which recently received an exemption, and Japan could unknowingly import metal from restricted countries and then export that to the U.S., flooding the market.
The U.S. imported about 1.7 million metric tons of steel from Japan in 2017, the most recent year not affected by the tariffs, and 1.9 million tons in 2016, Census Bureau data show.
Last month, the U.S. and U.K. started talks to address tariffs on both steel and aluminum and the problem of global overcapacity, aiming to remove a long-standing irritant between the two nations and focus attention on China.
The U.S. and EU are trying to leverage their October deal into a broader global arrangement that would penalize countries that don’t meet low-carbon targets for steel and aluminum exports, allowing the traditional allies to focus their attention on China, which they accuse of flooding the market with cheap exports.
The Japan deal includes a carbon component, one of the people familiar said, while adding that it will be different from the EU agreement.
Source:Bloomberg
