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Asia & Pacific

As U.S. allies, Japan and South Korea feel particularly wounded over steel tariffs

By Anna Fifield, Emily Rauhala

March 8, 2018 at 10:08 AM

TOKYO — No world leader has tried harder to get onto President Trump’s good side than Japanese Prime Minister Shinzo Abe. From racing to New York the day after the 2016 election and presenting Trump with a $3,755 gold-plated golf driver to taking him out on the golf course and serving hamburgers for lunch, Abe has cultivated a close personal relationship with his American counterpart.

And on a policy front, Abe has been an enthusiastic supporter of almost everything Trump has said, especially when it comes to putting “maximum pressure” on North Korea.

But now, Japan, which is not just led by a friendly politician but is a key security ally of the United States, looks likely to be slapped with tariffs on its steel exports to the United States.

“The U.S. is suddenly treating Japan as a target,” said Tsuyoshi Kawase, a professor of international trade policy at Sophia University in Tokyo. 

Things had been looking up for Japan on the trade front. Trump had been talking about returning to the 12-nation Trans-Pacific Partnership, which Japan had helped conclude even after the United States withdrew, and high-level trade talks had been taking place.

“The Japanese side is bewildered and confused, wondering if the U.S. will really impose these tariffs on Japanese steel,” Kawase said.

Trump delayed making a final decision on imposing tariffs on steel and aluminum imports, although he has intimated that Canada and Mexico will get an exception. Other countries will be considered on national security grounds, the White House has said.

Related: [Trump, working to finalize tariffs plan, to offer temporary exemption to Canada, Mexico ]

Japan and South Korea, another close security ally that is also set to be hit with tariffs, are now furiously lobbying the Trump administration to be exempted.

South Korea is the third-largest exporter of steel to the United States, after Canada and Brazil. It sold 3.5 million tons of steel products to the United States last year. Japan exported 1.9 million tons of steel to the United States last year and 33,000 tons of aluminum. 

Trump has proposed tariffs of 25 percent on steel imports and 10 percent on aluminum.

South Korea’s trade minister, Kim Hyun-chong, is now on his second trip to Washington in two weeks, meeting with Commerce Secretary Wilbur Ross and Trade Representative Robert E. Lighthizer, as well as key lawmakers such as Senate Finance Committee Chairman Orrin G. Hatch (R-Utah). That is in addition to the campaign being waged in Washington by a special South Korean trade task force.

The trade battle with South Korea — the prospect of steel tariffs follows on the heels of similar levies on solar panels and washing machines — comes at a sensitive time on the diplomatic front. 

Trump’s administration does not exactly have the best relationship with Moon Jae-in’s progressive government in Seoul. But Moon has been going all-out to facilitate dialogue between North Korea and the United States, creating the prospect of a lull in tensions, if not the start of a thaw.

With the alliance in a delicate spot, South Korea’s Foreign Ministry said this week that the tariffs could have a “negative impact on South Korea-U.S. relations.”

Ahn Deuk-geun, a professor at Seoul National University’s Graduate School of International Studies, said: “The South Korean government is perplexed with this trade backlash because it comes at a time of cooperation with the U.S. on North Korea-related issues. The South Korean government maintains that the security and trade issues are separate, but in the big picture, this is awkward.”

This will only become more awkward if South Korea takes a case against the United States to the World Trade Organization.

Related: [Over four decades, Trump’s one solid stance: A hard line on trade ]

For its part, China is issuing stern warnings that it would come back with a “justified and necessary” response if the United States moved to start a larger trade war. 

“As for our trade frictions, history teaches us that trade war is never the right solution,” China’s foreign minister, Wang Yi, said at a news conference Thursday. “In a globalized world it is particularly unhealthy, as it will harm the initiator as well as the target country.”

“The bottom line is,” Wang said, “as the world’s largest economies, China and America’s interests are deeply entwined.”

Andy Rothman, an investment strategist at the Matthews Asia investment firm, said that if China believes it is being targeted on trade by Washington,“Beijing will respond in a proportionate way — probably by curbing imports of American soybeans in the hope that Midwestern farmers will mark their displeasure at the ballot box in November’s midterm elections.”

While China is threatening and South Korea is lobbying, Japan is trying to work behind the scenes to get added to the exemption list.

“Japan is taking a quiet approach, trying not to let the trade issue take a toll on the overall alliance,” said Tsuneo Watanabe, a senior research fellow at the Sasakawa Peace Foundation.

“If Japan protests openly, it would just lead to a tit-for-tat with Trump, and Japan knows that’s something it shouldn’t do,” he said.

To try to avoid tariffs, Japan’s officials are focusing particularly on the fact that its steel industry — unlike China’s — poses no national security threat to the United States.

“Exports of high-quality steel and aluminum from Japan, a U.S. ally, do not damage the U.S.’s national security in any way,” Hiroshige Seko, Japan’s trade minister, told reporters in Singapore this week. “Instead, they are contributing to the U.S. economy and creating jobs.”

Related: [Trump vows to strike back at European leaders who warned of retaliation for his tariffs ]

Toyota Motor Corp., the world’s second-largest carmaker, has said the tariffs would substantially raise the prices of cars and trucks it sells in the United States. Japanese steel company executives are concerned that the move could cause upheaval in global markets.

“We are deeply concerned these tariffs will affect the steel trade across the entire world, especially if other countries follow suit and also become protectionist,” said Kosei Shindo, who is president of Nippon Steel, Japan’s biggest steelmaker, and chairman of the Japan Iron and Steel Federation.

“Trump says the WTO has ruined the U.S. economy, but the free-trade order that WTO sustains is extremely important for the whole world,” Shindo said at a news conference.

Said Watanabe, the Japanese researcher: “When trade friction grows between allies, the alliance is weakened. But it’s unclear if Trump understands that.” 

Rauhala reported from Beijing. Yuki Oda in Tokyo and Min Joo Kim in Seoul contributed to this report.

Read more

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Related: Trump asked Moon to give him public credit for pressuring North Korea into talks

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Anna Fifield is The Washington Post’s bureau chief in Tokyo, focusing on Japan and the Koreas. She previously reported for the Financial Times from Washington, D.C., Seoul, Sydney, London and from across the Middle East.

Emily Rauhala is China correspondent for The Washington Post. She was previously a Beijing-based correspondent for Time and an editor at the magazine's Hong Kong office. In 2017, she shared an Overseas Press Club award for a series about the Internet in China.

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Asia & Pacific

As U.S. allies, Japan and South Korea feel particularly wounded over steel tariffs

By Anna Fifield, Emily Rauhala

March 8, 2018 at 10:08 AM

TOKYO — No world leader has tried harder to get onto President Trump’s good side than Japanese Prime Minister Shinzo Abe. From racing to New York the day after the 2016 election and presenting Trump with a $3,755 gold-plated golf driver to taking him out on the golf course and serving hamburgers for lunch, Abe has cultivated a close personal relationship with his American counterpart.

And on a policy front, Abe has been an enthusiastic supporter of almost everything Trump has said, especially when it comes to putting “maximum pressure” on North Korea.

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