U.S., Japan reach deal to cut tariffs on Japanese steel, fight excess output By Reuters



© Reuters. FILE PHOTO: A worker stands near steel coils and steel rods at a steel collection facility in Tokyo, Japan, October 30, 2015. Japanese steelmakers are facing a supply glut, weak orders for drill pipe due to slumping oil prices, and softer-than-expected do

By David Lawder

(Reuters) – The United States and Japan on Monday announced a deal to remove Trump-era tariffs from about 1.25 million metric tons of Japanese steel imports annually after Washington granted similar access for European Union steelmakers last year.

The new deal, which excludes aluminum at Japan’s request, will take effect on April 1 and requires Japan to take “concrete steps” to fight global excess steel manufacturing capacity, largely centered in China, U.S. officials said.

A joint U.S.-Japan statement said Japan would start to implement within six months “appropriate domestic measures, such as antidumping, countervailing duty, and safeguard measures or other measures of at least equivalent effect,” to establish more market-oriented conditions for steel.

The agreement, like the EU steel and aluminum deal reached in October, calls for steel imported from Japan to be completely produced in the country for duty-free access, a standard known as “melted and poured,” to reduce the risk of Chinese steel skirting U.S. tariffs.

STRAINS WITH ALLIES

Much of the Biden administration’s trade efforts have centered around patching up strained relations with U.S. allies that are market-driven democracies.

U.S. Commerce Secretary Gina Raimondo said the deal “will strengthen America’s steel industry and ensure its workforce stays competitive, while also providing more access to cheaper steel and addressing a major irritant between the United States and Japan, one of our most important allies.”

Unlike the EU and Britain, which is seeking a similar deal, Japan did not impose retaliatory tariffs on U.S. goods.

U.S. steel industry executives have voiced concern about the Biden administration negotiating too much access for foreign steel makers that would unleash a flood of imports and crash steel prices at a time when they are investing billions of dollars in new capacity.

But the deal announced on Monday limits Japanese imports to about their two-year average from 2018 and 2019, a level largely set after the 25% “Section 232” national security tariffs were imposed by former president Donald Trump.

Unlike the EU deal, past steel product exclusions from tariffs will not be added to Japan’s quota for two years. Any exclusions must be applied for through the Commerce Department’s normal process, according to the U.S. announcement.

Japan also will initially not participate in U.S.-EU talks on a global agreement to discourage trade in steel made with high carbon emissions – another initiative aimed at battling carbon-intensive Chinese steel output. But U.S. officials said that Japan would confer with the United States on methodologies for measuring carbon intensity in steel and aluminum production.

Japan’s steel industry also is highly dependent on coal-fired blast furnace production, while more than 70% of U.S. steel is made with electric-arc furnaces that emit less carbon.

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