Trump Tariffs Can Hit Japanese Business

The President of the United States Donald Trump signed proclamations imposing 25 percent of tariffs on imports of steel and aluminum. Although the officials of Japanese government expect US president not to apply additional tariffs on products from Japan, Trump unequivocally told the reporters in the Oval Office that the 25-percent tariffs are “without exceptions or exemptions.” Right after Prime Minister Shigeru Ishiba came back from “successful” meeting with Trump in Washington DC, it is likely that Japanese business will face concern in world trade.  

In his first term as the president, Trump imposed 25-percent tariffs on steel and 10-percent on aluminum. While he has not declared that the flat 25-percent tariffs would be applied to all countries, it looks predictable that the tariffs will work as bargaining chips against the exporters of those materials to protect US workers. It is likely that the tariffs targets China, which is known as excessive production of steel.

 

When Trump announced imposition of 25 percent of tariffs on Canada and Mexico, which were later suspended for a month, he meanwhile introduced 10 percent tariffs on China. China enacted maximum 15 percent of additional tariffs on coals and natural gas from the US as a retaliation to Trump tariffs. Chinese Foreign Ministry spokesman Guo Jiakun urged the United States to "correct its wrongdoing" by stopping the new 10 percent tariff.

 

If Chinese economy slows down with tariff war, Japanese exporters to China will also be affected. Some manufacturers which have factories in China can be restricted to export their products from China to US. 

 

Trump tariffs can directly affect Japanese business. Trump told the reporters onboard Air Force One that “nobody can have a majority stake for US Steel.” Ishiba and Trump agreed on defining the deal between Nippon Steel and US Steel as not an acquisition but an investment. It is supposed that the original deal for Nippon Steel to take over US Steel with obtaining 100 percent share must be fundamentally revised.

 

Nippon Steel has a plan that it would share advanced technologies with US Steel, such as electromagnetic steel plate for electric vehicles, if the acquisition deal is finished. However, such important technology cannot be exported to a foreign company without a highly close partnership. The president of Nippon Steel is going to meet with Trump to explain the deal. “I recognize that Nippon Steel is considering a bold offer totally different from previous ones,” said Chief Cabinet Secretary Yoshimasa Hayashi.

 

Even if the deal can be maintained with different conditions from original plan, it is skeptical for Nippon Steel to achieve preferable benefit from the “investment” on US Steel under Trump’s “America First” policy. In addition, Trump tariffs can bring restraints on other manufacturers of steel and aluminum in Japan. China may impose additional tariffs on Japanese products in the context of world trade war.

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