Trump Tariffs on Allies Won't Solve US Steel Industry Problems

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Aggressive protectionist actions taken by the Trump administration are extremely concerning. It is pushing ahead with an "America First" agenda without regard for its relations with allies and like-minded countries.

President Donald Trump has signed a directive imposing an additional 25% tariff on all imports of steel and aluminum products. The order, which takes effect on March 12, will also apply to Japanese steel products.

President Trump is probably aiming to protect the struggling domestic industry and expand employment. He may also regard it as a national security issue and want to preserve a capability for stable domestic production of steel products. Indeed, they are needed for military purposes.

However, even if that is the case, the imposition of new across-the-board tariffs is a highly problematic decision. It would be extremely self-righteous to unilaterally impose additional tariffs and conspicuously ignore the international order that promotes free trade.

Reaction to the Announcement

The European Union is prepared to take countermeasures. If retaliatory tariffs are imposed, it would negatively impact the global economy, including the United States. Above all, we must avoid disrupting the unity of Western countries. Instead, we should be standing shoulder-to-shoulder in resisting Chinese expansionism and other threats.

On February 12, the Japanese government requested an exemption from the application of the new US tariffs. Too, the government must respond firmly to any unreasonable measures taken by the US that harm Japan's national interests.

Actually, the first Trump administration also imposed additional tariffs on steel and aluminum. Subsequently, the US exempted Canada and certain other countries from the tariffs and established a tariff-free quota for Japanese products. Such exceptions would now be vanquished.

Some observers believe the impact of new US tariffs on the Japanese economy would be limited. This is because Canada and certain other countries are the major exporters of steel products to the United States. Meanwhile, Japan's exports are considerably smaller. However, the auto industry and others with production facilities in the US are quite concerned that tariffs will make procurement of parts and materials more expensive.

*Chinese electric vehicles are lined up at the port of Xiamen, Fujian Province, China, waiting to be exported. (©Xinhua via Kyodo)*

Chinese Industry Subsidies, Dumping at the Root

The structural problem created by Chinese companies is at the root of the reason for the US steel and other tariffs. Chinese companies benefit from excess production capacity, thanks to government subsidies. Then they flood world markets with cheap products.

Although China's direct exports of steel to the United States are limited, the US government is convinced that Chinese products are entering its borders via third countries. However, it would be unreasonable to impose uniform tariffs on all countries due to that belief.

Trump is already considering an exemption for Australia, a country with which the US enjoys a trade surplus. Whether or not the tariffs are applied to Japan may depend on whether a deal can be worked out.

Regarding Nippon Steel's proposal to buy US Steel, Trump has indicated his intention to not allow Nippon Steel to hold a majority stake in the company. However, he does not object to deepening Japan-US cooperation in the steel sector. With that in mind, Japan should press him to reconsider the imposition of tariffs on Japan.