Tokyo warns of damage to US-Japan alliance as Asia steels itself for influx of Chinese metal

Japan's Minister of Trade and Industry Hiroshige Seko arrives at Prime Minister Shinzo Abe's official residence in Tokyo on Aug 3, 2017. PHOTO: REUTERS

TOKYO - Japan has warned of potential damage to its longstanding alliance with the United States, as Washington's new tariffs on steel and aluminium imports kicked in.

A spokesman for Japan's Foreign Ministry told The Straits Times on Friday (March 23) that the measures "may have significant negative impact on the Japan-US economic and cooperative relations as allies, as well as the global economy and multilateral trading system as a whole".

Trade minister Hiroshige Seko framed US President Donald Trump's decision not to exempt Japan as "extremely regrettable", and said Tokyo would consider measures under the World Trade Organisation (WTO) even as it continued to press Washington to reconsider.

But the duties may have limited impact on Japan, as only two per cent of its steel exports go to the US, the Nikkei Asian Review reported. The report also quoted Japan's largest steelmaker, Nippon Steel & Sumitomo Metal, as warning that the tariff costs could be passed on to US customers, and that its products are not easily replaceable.

Despite Japan's efforts to warm up to the Trump administration, Mr Trump told a news conference on Thursday: "I'll talk to Prime Minister (Shinzo) Abe of Japan and others - great guy, friend of mine - and there will be a little smile on their face.

"And the smile is, 'I can't believe we've been able to take advantage of the United States for so long.' So those days are over."

Dr Yasushi Watanabe of Keio University, an expert in US-Japan ties, told The Straits Times that the US move was a strategy by Mr Trump to prod a reluctant Tokyo towards a bilateral free-trade agreement (FTA) instead of a multilateral one which Tokyo favours.

South Korea, which is in tense re-negotiations with the US over a bilateral FTA, won a reprieve, much to the relief of trade officials. It is the third largest steel exporter to the US, after Canada and Brazil, with 3.6 million tonnes of steel products sold last year. All three countries were granted temporary exemptions from the tariffs till end April.

Trade Minister Kim Hyun Chong told the Yonhap News Agency that Seoul would negotiate for a permanent exemption, though experts warn that Washington could be using the tariffs as leverage for a better deal in their FTA.

In India, analysts warned that New Delhi might be next in the firing line. Jawaharlal Nehru University economics expert Biswajit Dhar told The Straits Times that he expected the US to next tackle intellectual property (IP) rights, which India has been identified to have violated.

The tariffs came even as India and the US have been growing closer strategically, and commerce secretary Rita Teaotia said last week that India was "surprised and disappointed".

Asean countries are also bracing for an influx of cheap Chinese metals in the event of an all-out trade war between the US and China.

Mr Phong Quach, country head for Vietnam at Ipsos Business Consulting, told The Straits Times that regional prices could be pushed down were China to divert its exports to Asean.

Bank of Thailand board member Anusorn Tamajai told The Straits Times that the tit-for-tat between the US and China would "push global trade to extreme conditions and hit Thai exports", with consumers having to bear the cost of inflation.

Over in Malaysia, where exports account for 71 per cent of the economy, Kenanga Investment's head economist Wan Suhaimie Saidie said: "Malaysia will be hit as both countries (US and China) combined account for more than a quarter of Malaysia's total exports."

In Manila, Philippine Trade Secretary Ramon Lopez saw the potential influx of steel products from China as a silver lining.

"There might be excess supply or glut that can bring down prices of steel products and support our infrastructure push."

But Economic Planning Secretary Ernesto Pernia warned of the bigger implications of a looming trade war to overall growth and exports for the Philippines.

He said: "Let's hope the two economic superpowers will come to their senses."

Additional reporting by Chang May Choon in Seoul, Nirmala Ganapathy in New Delhi, Tan Hui Yee and Jitsiree Thongnoi in Bangkok, Shannon Teoh in Kuala Lumpur and Raul Dancel in Manila

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