Trade officials from the United States and Japan announced on Monday they had reached a bilateral deal that will allow most Japanese steel shipments to enter duty-free and commits the countries to working together to combat “China’s anti-competitive, non-market trade actions in the steel sector.”
In a joint statement, the U.S. and Japan pledged to coordinate on “both trade remedies and customs matters” to advance efforts to tackle the chronic global overcapacity that is harming the industry.
Under the agreement, effective April 1, 2022, the U.S. will suspend the 25% levy on steel imports from Japan up to 1.25 million metric tons a year, in line with average historical volumes prior to the pandemic. To prevent circumvention, in order to qualify for duty-free treatment under the TRQ, steel imports must be “melted and poured” exclusively in Japan. The deal also allows for so-called derivative steel articles from Japan to be exempt.
Additionally, the U.S. will maintain its current tariff exclusion process for Japanese steel imports. However, such excluded steel goods—estimated to accounted for nearly 60% of Japanese steel imports in 2021—will still count toward the quota volume.
In 2018, the Trump administration imposed a 25% tariff on steel imports and a 10% tariff on aluminum imports under Section 232 of the Trade Expansion Act of 1962, citing “national security” concerns. Since then, the issue has been a significant irritant between the U.S. and various steel exporting trade partners impacted by the tariffs.
The agreement with Japan, which does not include aluminum, comes four months after Washington struck a similar deal with the EU that also included a TRQ system, an end to European retaliatory tariffs and a pledge to launch talks aimed at creating a global arrangement to address carbon intensity and overcapacity in the steel industry.
According to United States Trade Representative Katherine Tai, the deal “will help ensure the long-term viability of our steel industry and protect American jobs.” It was also, part of the Biden administration’s “efforts to provide relief for American manufacturers who rely on readily accessible, affordable steel to make their products,” she said.
Response to the deal has been generally positive, with both industry and labor leaders backing the administration’s willingness to negotiate more effective alternative schemes to the 232 tariffs on a case-by-case, country-by-country basis.