The USA and Japan have agreed to remove steel tariffs from around 1.25Mt (metric tonnes) of Japanese steel imports.
The agreement, claims a BBC report, takes effect on 1 April and is designed to stamp out 'unfair practices' in the global industry.
A similar deal has already been made with the European Union, but tariffs remain in place on UK imports.
Gina Raimondo, US Commerce Secretary, said that the agreement with Japan will enable the US to rebuild relationships with its allies around the world as it fights against 'China's unfair trade practices'.
The tariffs were introduced by former US president Donald Trump under Section 232 of the Trade Expansion Act of 1962, citing cheap metal imports as a national security threat.
Under the deal, the US will stop charging a 25% tariff on imports of steel from Japan (excluding aluminium) up to a threshold of 1.25Mt (metric tonnes). In return, the Japanese will take steps within six months to support what the US and Japan see as a fairer steel market, states the BBC report. Such measures include taxing goods believed to be priced below market value.
The investment community cautiously welcomed the news. Vishnu Varathan, head of economics and strategy at Mizuho Bank, told the BBC that lifting Trump-era tariffs was 'consistent with expectations that the Biden administration would align its geo-political and trade alliances'. He said that the initial tariffs didn't impact China too badly and that the deal with Japan was really about reparations of relations 'in a longer trade game'.
Today, the United States and Japan reached an agreement that allows imports of Japanese steel to be subject to a tariff-rate quota (TRQ), allowing a certain amount of imports to enter the U.S. free of any Section 232 tariffs.
The agreement calls for quota volumes of 1.25 million metric tons. This amount is based on 2018-2019 shipment levels. Other key provisions of the deal include a melted and poured requirement and counting exclusions against the quota volume.
Steel Manufacturers Association president Philip K Bell said: “The SMA is pleased with this agreement. It shows that the US government is committed to negotiating alternative schemes to the 232 tariffs on a case-by-case, country-by-country basis. We are particularly glad to see that that exclusion-based imports of Japanese steel products will count against the quota volumes. In 2021, 58% of Japanese imports came to our shores as exclusions. This represents approximately 550,000 metric tons of steel products.”
Bell added, “The melted and poured requirement will help prevent circumvention and transshipment of steel products and the inclusion of an adjustment mechanism will allow the flexibility needed to deal with changes in the global steel market. Overall, this is a strong deal for American steelmakers and it shows that we should not take a one size fits all approach when it comes to our jobs, environment and economic growth.”
Kevin Dempsey, president and CEO of the American Iron and Steel Institute (AISI), thanked Secretary Raimondo and Ambassador Tai for ensuring that, as the United States and Japan seek to expand their co-operation on addressing global steel excess capacity and related trade and customs enforcement matters, a tariff-rate quota (TRQ) on steel imports from Japan will be established under Section 232 to prevent another steel import surge that would undermine the US industry and destroy American jobs.
“We appreciate the Biden administration’s continued recognition that the American steel industry is critical to our national and economic security and to efforts to build a more sustainable US economy," said Dempsey. "Proper implementation and enforcement of the TRQ will be essential to the ongoing success of the Section 232 programme, as will continued vigorous enforcement of our laws to prevent circumvention and evasion of US trade remedy measures on steel.”
Dave Townsend, an attorney at the international law firm Dorsey & Whitney in its corporate group and its technology commerce and national security law practice groups, commented: “The agreement provides another potential source for US importers and consumers of steel by purchasing from Japan without having to pay 25% tariffs under Section 232. This agreement appears akin to the agreement reached with the European Union, which allows EU steel imports to enter the United States without being subject to the 232 duties while also freezing the quantity of such duty-free imports at levels from prior years,” he said.
“Also, the Biden Administration in announcing the agreement with Japan continues to take aim at excess Chinese steel and aluminium capacity, stating that excess capacity harms market-oriented industries in the United States. According to news reports, the agreement also will not permit third-country steel to be finished in Japan and receive duty-free treatment under the US-Japan agreement. This again appears aimed at producers that might source steel from China and finish merchandise in Japan for export to the United States,” Townsend added.