{"id":6972,"date":"2025-03-18T06:15:20","date_gmt":"2025-03-18T05:15:20","guid":{"rendered":"https:\/\/lundgreenscapital.com\/uk\/?p=6972"},"modified":"2025-03-18T06:15:20","modified_gmt":"2025-03-18T05:15:20","slug":"is-japans-steel-immune-to-trumps-tariff-game","status":"publish","type":"post","link":"https:\/\/lundgreenscapital.com\/uk\/is-japans-steel-immune-to-trumps-tariff-game\/","title":{"rendered":"Is Japan\u2019s steel immune to Trump\u2019s tariff game?"},"content":{"rendered":"

President Donald Trump\u2019s return to office led to the imposition of more tariffs on US trade partners under the guise of ensuring \u201cfair\u201d trade while boosting the domestic economy. This has raised concerns about retaliation from affected countries and higher commodity prices in the US. Barely two weeks into his presidency, Trump announced a 10 per cent tariff on China<\/a> and threatened similar rates on neighbouring countries like Canada and Mexico. Japan, one of America\u2019s leading allies and a strategic trading partner, was initially safe from Trump\u2019s onslaught \u2013 that is, until recently.<\/p>\n

A new wave of tariffs that took effect on 12 March raised the duty on imported steel and aluminium<\/a> to 25 per cent and 10 per cent, respectively, across all countries, including allies like Japan. While the US is not Japan\u2019s biggest steel market, it still ranks among the top 10 destinations for Japanese steel products. Despite being a long-standing ally and trading partner, Japan now finds itself caught in Trump\u2019s tariff war once again.<\/p>\n

Looking back to 2018<\/h3>\n

To understand the potential impact of the new duties on the Japanese steel industry, one should look to Trump\u2019s tariffs imposed in 2018.<\/p>\n

During his first term in the White House, Trump imposed a 25 per cent tariff on steel imports due to supposed national security reasons. As the world\u2019s third largest steel producer<\/a> after China and India with 30 per cent of its steel production exported, Japan was arguably affected by the tariff. Although the US is not among the top five export destinations for its iron and steel, the imposed tariff was enough to raise concerns in the Land of the Rising Sun the market accounts for over 5 per cent of the country\u2019s total steel exports, as seen in Graph 1.<\/p>\n

\"Is<\/a><\/p>\n

The implementation of the tariff in March 2018 led to a decrease in export value to the US by about 6.2 per cent to settle at USD 1.73 billion in 2019. Further, data from UNCTAD shows a decrease of about USD 2.9 billion in overall iron and steel export values between 2018 and 2019. Japan responded by increasing its exports to Southeast Asia and other alternative markets to offset the losses. In terms of specifics, while export volumes of Nippon Steel<\/a> dropped by about 3 million tons between 2017 and 2018, export value remained almost the same at USD 33 million given higher steel prices. Notably, the largest drop in steel shipments was seen from Asian markets, not the US.<\/p>\n

On the flipside, American steel manufacturers benefited from a tariff-induced domestic price increase as they faced less competition<\/a> from foreign firms, particularly Chinese producers, allowing them to make profits as prices increased by about 10 per cent. One may assume that the tariff worked in Trump\u2019s perspective, which is why he revived the same policy strategy.<\/p>\n

Conversely, Japanese steel giants like Nippon Steel \u2013 the fourth biggest steel company globally<\/a> \u2013 and Toyota Tsusho saw only minor dips in their stock prices by 4.45 per cent and 6.98 per cent, respectively, when the fresh tariffs were announced. Shares of both companies bounced back quickly, suggesting a limited impact of the tariff and a strong domestic market.<\/p>\n

Unlike China, the world\u2019s largest steel source which responded by engaging in a tariff war with the US, Japan took the diplomatic route and sought an exemption in 2018, however, that endeavour was unsuccessful. Although the extra tariff remained in place, Japan reached an agreement with the Biden administration in 2022 which allowed some amount of Japanese steel to be imported to the US duty-free.<\/p>\n

Nippon Steel has also attempted to acquire US Steel for USD 14.9 billion late 2023, albeit unsuccessful in light of the US\u2019 stance to protect domestic firms and guard national security interests. However, Trump has hinted<\/a> recently that Nippon Steel will instead be investing in US steel to strengthen domestic capacity. However, both the Biden and Trump administrations rejected Nippon Steel\u2019s attempt to buy US Steel Corp.<\/a> over national security considerations.<\/p>\n

Same tariff, old strategy<\/h3>\n

With the additional tariffs imposed, will history repeat itself?<\/p>\n

If 2018 is any guide, Japan\u2019s steel industry will face some short-term impact but it can quickly recover and adapt. Graph 2 shows that the share prices of the big three Japanese steel manufacturers showed minimal disruptions days after the fresh duties took effect, even rising a week later. Nippon Steel and Toyota Tsusho only showed minor fluctuations immediately after the February tariff announcement, which suggests that investors are not in panic mode.<\/p>\n

\"Is<\/a><\/p>\n

As before, Japan has no intention of imposing a retaliatory tariff on the US. Japan\u2019s trade minister<\/a>, Yoji Muto, has so far not secured assurance of a duty exemption for Japanese goods after meeting US Secretary of Commerce Howard Lutnick, including the potential tariff on Japan-made cars.<\/p>\n

From our standpoint, the new US tariffs will only exert a short-term impact on export volumes of Japanese steel to the US similar to the 2018 episode. This brief slip in valuations and shipment disruptions is unlikely to linger as the long-standing relationship between Japan and the US is likely to lead to a compromise. We see that Trump is using tariffs as a bargaining chip for foreign governments to adhere to his demands, and this opens the table for negotiations.<\/p>\n

Moreover, Japan is consistently seeking increased exports to other countries by leveraging its manufacturing prowess. Investors should be aware that Trump\u2019s strategy has been raising the uncertainty in the financial markets and is triggering short-term volatility, but it would not easily dislodge China, India, and Japan\u2019s dominance in global steel production. Appetite towards Japanese steel stocks, along with other investment assets, will remain upbeat as more interest rate hikes are expected this year, in contrast to the global trend of rate cuts.<\/p>\n

 <\/p>\n

This original article has been produced in-house for Lundgreen\u2019s Investor Insights by on-the-ground contributors of the region. The insight provided is informed with accurate data from reliable sources and has gone through various processes to ensure that the information upholds the integrity and values of the Lundgreen\u2019s brand.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

President Donald Trump\u2019s return to office led to the imposition of more tariffs on US trade partners under the guise of ensuring \u201cfair\u201d trade while boosting the domestic economy. This has raised concerns about retaliation from affected countries and higher commodity prices in the US. Barely two weeks into his presidency, Trump announced a 10… <\/p>\n

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