A worker stands near steel coils and steel rods at a steel gathering facility in Tokyo, Japan October 30, 2015. Japanese steelmakers are facing a supply glut, low drill rod orders due to falling oil prices and a softer than expected domestic market. demand, depressing profits and production. REUTERS/Toru Hanai

Feb 8 (Reuters) – The United States and Japan announced an agreement on Monday to remove Trump-era tariffs on about 1.25 million metric tons of Japanese steel imports each year after Washington granted similar access to European Union steelmakers last year.

The new agreement, which excludes aluminum, will come into force on April 1 and requires Japan to take “concrete steps” to tackle global excess steelmaking capacity, largely concentrated in China, U.S. officials said. .

A joint U.S.-Japan statement says Japan will begin implementing within six months “appropriate national measures, such as anti-dumping, countervailing duties and safeguard measures or other measures of at least equivalent effect “, in order to establish more market-oriented conditions for steel.

The deal, like the EU steel and aluminum deal reached in October, provides for steel imported from Japan to be produced entirely in the country for duty-free access, a standard known as the name of “melted and cast”, in order to reduce the risk of Chinese steel. bypassing US tariffs.

“It’s a step towards a solution…but we will continue to urge the United States to completely eliminate the tariff in a manner consistent with WTO rules,” Japan’s Minister of Foreign Affairs said on Tuesday. Industry, Koichi Hagiuda.

A ministry official said the exclusion of aluminum reflected the US position and was not a request from Japan.

STRAINS WITH ALLIES

Much of the Biden administration’s trade efforts have focused on mending strained relations with U.S. allies who are market-oriented democracies.

US Commerce Secretary Gina Raimondo said the deal will “strengthen the US steel industry and ensure its workforce remains competitive, while providing greater access to cheaper steel and solving a major irritant between the United States and Japan, one of our most important allies.”

Unlike the EU and Britain, which are seeking a similar deal, Japan has not imposed retaliatory duties on US goods such as whisky, motorcycles and denim.

The deal comes as U.S. steel prices begin to retreat from record highs boosted by strong demand and pandemic-related supply constraints, which have contributed to high inflation across the country. the economy.

Midwest hot-rolled steel futures, which peaked at $1,945 a ton last September, closed at $1,180 on Tuesday, still nearly double their price of $578 on Feb. 7, 2020, before the pandemic hit.

INDUSTRY RELIEF

U.S. steel industry executives had expressed concern that the Biden administration would negotiate too much access for foreign steelmakers and trigger a flood of imports as they invest billions of dollars in new capacity.

But industry leaders expressed relief that the deal announced on Monday limits Japanese imports to around their two-year average between 2018 and 2019, a level that reflects the impact of national security tariffs of 25%” Section 232″ imposed by former President Donald Trump. .

Unlike the EU agreement, which added past tariff exclusions to the bloc’s quotas, Japanese steel imported under past tariffs will be deducted from Japan’s quota volumes.

Steel Manufacturers Association President Philip Bell said about 58% of steel imports from Japan in 2021, or about 550,000 metric tons, came from exclusions, so the deal would limit the additional volume.

“Overall, this is a solid deal for American steelmakers. It shows we don’t have to take a one-size-fits-all approach when it comes to our jobs, our environment and our economic growth,” Bell added.

CARBON TALKS REMOVAL

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

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

Additional reporting by David Brunnstrom in Washington, Kanishka Singh in Bengaluru and Yuka Obayashi in Tokyo; Editing by Barbara Lewis, Stephen Coates and Richard Pullin

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