US, Japan reach deal to cut tariffs on Japanese steel, fight excess output

“The United States and Japan on Monday announced a deal to remove Trump-era tariffs from about 1.25 million metric tons of Japanese steel imports annually after Washington granted similar access for European Union steelmakers last year,” said Reuters during late Tuesday morning in Asia.

The news quotes US official to mention, “The new deal, which excludes aluminum at Japan's request, will take effect on April 1 and requires Japan to take ‘concrete steps’ to fight global excess steel manufacturing capacity, largely centered in China.”

A joint statement was also mentioned stating that Japan would start to implement within six months "appropriate domestic measures, such as anti-dumping, countervailing duty, and safeguard measures or other measures of at least equivalent effect,” to establish more market-oriented conditions for steel.

Key quotes

US Commerce Secretary Gina Raimondo said the deal ‘will strengthen America’s steel industry and ensure its workforce stays competitive, while also providing more access to cheaper steel and addressing a major irritant between the United States and Japan, one of our most important allies.’

Unlike the EU deal, past steel product exclusions from tariffs will not be added to Japan's quota for two years. Any exclusions must be applied for through the Commerce Department's normal process, according to the U.S. announcement.

Japan also will initially not participate in U.S.-EU talks on a global agreement to discourage trade in steel made with high carbon emissions - another initiative aimed at battling carbon-intensive Chinese steel output. But U.S. officials said that Japan would confer with the United States on methodologies for measuring carbon intensity in steel and aluminum production.

Japan's steel industry also is highly dependent on coal-fired blast furnace production, while more than 70% of U.S. steel is made with electric-arc furnaces that emit less carbon.

FX implications

Considering a lack of major data/events and the market’s wait for Thursday’s US Consumer Price Index (CPI), traders paid a little heed to the news with the USD/JPY prices waiting for Tokyo open after ending the sluggish week-start day near 115.00