Japan to continue talks for full exemption of US tariffs

A partial abolition of 'Article 232' imposed upon steel imports from Japan by USA has been effected from April. However, Japan intends to continue negotiations for complete abolition of the tariffs.

With regard to the revision of Article 232 (Defense Clause) of the US Trade Expansion Act, the US side has agreed to establish a "tax-free quota" for steel. Negotiations had been continuing with regard to the complete abolition as requested by the Japanese side.

It may be mentioned, USA and Japan have recently agreed to remove Trump-era tariffs from around 1.25 million tonnes (mnt) a year of Japanese steel imports. Under the new deal, USA will stop charging a 25% levy on Japanese steel imports, excluding aluminium, up to a 1.25 mnt annual threshold.

The steel "tax-free quota" in Article 232 will be applied from April. The annual tax-free quota is 1.25 mnt, which will be allocated to 54 items based on the import record over 2018-19. A 25% tariff, based on Article 232, will be applied to the portion exceeding the tax-free limit. Steel tertiary products that were applied in January 2008 will be excluded from the scope of Article 232.

However, since the exemption system for each product of steel and aluminum will continue, it is not expected that there will be a significant impact on aluminum products.

In addition to the agreement on Article 232, the US and Japanese governments have also agreed to start discussions on the establishment of a new international framework centered on the two governments for further development of the steel and aluminum industries.

Before the enforcement of Article 232, the export volume of steel to the United States (as per US customs clearance data) was 1.73 mnt (2017). The export volume gradually decreased since then, reaching 1.38 mnt in 2018, 1.13 mnt in 2019, and 720,000 tonnes in 2020. Exports to the United States are expected to revive to some extent post the easing of tariffs.

Regarding Article 232, last year, the Minister of Economy, Trade and Industry, Koichi Hagiuda, had agreed to start a review discussion at a meeting with the US Secretary of Commerce and the United States Trade Representative (USTR). The Japanese side called for a complete abolition of the tariffs. At present, as per the latest move, it will be "partial abolition", but the minister expressed his intention to continue negotiations for complete abolition of the tariffs.

The details of the new framework launched by the US and Japanese governments are yet to come, but it is expected to pursue sustainable development of both industries (steel and aluminium) in relation to areas such as overcapacity and decarbonization.

A similar framework is being considered between the US and the European Union, and there is a possibility that this framework will involve Japan, USA and Europe.

Note: This Insight has been published in accordance with an article exchange agreement between SteelMint and Japan Metal Daily.