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

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 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.

Indeed, Trump has 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.

Japan and South Korea, another close security ally which is also set to be slapped 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 slapping 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 Lighthizer, as well as key lawmakers like Senate finance committee chairman Orrin Hatch. That’s in addition to the campaign being waged in Washington by a special South Korean trade taskforce.

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.”

“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,” said Ahn Deuk-geun, a professor at Seoul National University’s Graduate School of International Studies. “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 the United States to the World Trade Organization.

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. In a globalized world it is particularly unhealthy, as it will harm the initiator as well as the target country,” China’s foreign minister, Wang Yi, said at a press conference Thursday.

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

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

While China is threatening and South Korea is furiously 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 U.S.

“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.”

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, president of Nippon Steel, Japan’s biggest steelmaker, who is also 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 press conference.

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

Rauhala reported from Beijing. Yuki Oda in Tokyo and Min Joo Kim in Seoul contributed reporting.

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