The government and industries in Japan have raised a sense of caution over measures invoked by the United States on Friday to restrict steel and aluminum imports.
Although many experts say the direct repercussions on Japanese companies will be limited, some say this could be a blow to Japanese steelmakers, among others, if products that they become unable to export to the United States wind up flooding the market, driving prices down dramatically.
To avert trade wars leading to tit-for-tat retaliation, a calm response to the situation is needed.
High-quality products
Japan exported about 1.9 million tons of steel products to the United States in 2017, an amount equal to only about 2 percent of Japan's total crude steel production of about 100 million tons. Many products, such as steel stock for railway rails or automobile bodies, and pipes for oil field development, are required to be of high quality in terms of durability, technological capacity and strength.
For this reason, even when additional tariffs are imposed on Japanese products, it is expected that it will be difficult for U.S. companies to instantly shift suppliers to makers in other countries. A senior official at the Economy, Trade and Industry Ministry said: "Many export goods are demanded [by U.S. firms]. So, damage to business in the country won't be serious."
On the other hand, many Japanese car makers have factories in the United States. If additional tariffs are imposed on steel or aluminum when they procure these materials from abroad, there is a possibility that it will lead to an increase in production costs. "Since we cannot obtain certain parts locally, there will be some impact," a person at Nissan Motor Co. said. Toyota Motor Corp. said that effects would be limited as 90 percent of its materials, including those for car bodies, are locally purchased.
Influence of China
However, the measures are applied to a wide range of countries. Only seven steel exporters, including Canada and the European Union, are exempted from the tariffs.
The Japanese steel industry is cautious about the situation and a senior official of a steelmaker said, "If low-priced steel products are kept out of the U.S. market and then they flow into other areas, steel products around the world will come down in price dramatically."
Main destinations for exports of Japanese steel products are Asian countries. In recent years, prices of such products have been affected by the export activities of China, the world's largest producer. Around 2014, overproduced Chinese products were exported to the world and prices of steel products dived. Drops in the performance of Japanese steelmakers including Nippon Steel & Sumitomo Metal Corp. took place.
The market condition of steel products has recently been improving since China has reduced the volume of steel exports in response to criticism of its overproduction. Under these circumstances, China might strengthen exports of steel products again to Asia or other regions, if export to the United States is restricted.
Exemptions being sought
The government intends to continuously ask the United States to exempt Japanese products from the measures. The procedure for exemptions from the measures by product has begun in the United States, and Japan's public and private sectors continue to seek exemptions. Economy, Trade and Industry Minister Hiroshige Seko said at a press conference after the Cabinet meeting on Friday, "I think that [Japanese products] have a high possibly of being exempted from application [of the measures] by item."
The true nature of the problem is the issue of China's overproducing products including steel. Tokyo will continue encouraging Washington to press China at the World Trade Organization, where the United States has filed complaints against China.
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