Major Asian nations reacted sharply on Friday to US President Donald Trump’s decision to impose tariffs on steel and aluminium imports, warning of damage to relations amid industry calls for retaliation.

Japan said the move would have a ‘big impact’ on the countries’ close bilateral ties, while China said it was ‘resolutely opposed’ to the decision and South Korea said it may file a complaint to the World Trade Organisation.

Trump last Thursday pressed ahead with the imposition of 25 per cent tariffs on steel imports and 10pc for aluminium last Thursday, though he announced exemptions for Canada and Mexico, and said exceptions could also be made for other allies.

China, which produces half the world’s steel, will assess any damage caused by the US move and “firmly defend its legitimate rights and interests,” the country’s Ministry of Commerce said.

Japan said the move would have a ‘big impact’ on the countries’ close bilateral ties, while China said it was ‘resolutely opposed’ to the decision and South Korea said it may file a complaint to the WTO

The tariffs would “seriously impact the normal order of international trade,” the ministry said.

The European Union, Brazil and Argentina said overnight they should not be targeted or would seek exemptions, and both Japan and South Korea said they would ask to be made exceptions also.

South Korea, a key Washington Asian ally, is the third largest steel exporter to the United States, after Canada and Brazil.

The US is the world’s biggest importer of steel, purchasing 35 million tonnes of raw material in 2017. Of those imports, South Korea, Japan, China and India accounted for 6.6m tonnes.

“We should prevent a trade war situation from excessive protectionism, in which the entire world harms each other,” Trade Minister Paik Un-gyu told a meeting with steelmakers.

Trade tensions between China and United States have risen since Trump took office. China accounts for only a small fraction of US steel imports, but its massive industrial expansion has helped create a global glut of steel that has driven down prices.

China’s steel and metals associations urged the government to retaliate against the United States, citing imports ranging from stainless steel to coal, agricultural products and electronics.

It was the most explicit threat yet from the country in an escalating trade spat.

The dispute has fuelled concerns that soybeans, the United States’ most valuable export to the world’s second largest economy, might be caught up in the trade actions after Beijing launched a probe into imports of US sorghum, a grain used in animal feed and liquor.

“The cost of a trade war will be tremendous and it will make everyone unhappy,” Junichi Makino, chief economist at SMBC Nikko Securities in Tokyo, said in a report last Friday.

Trans-shipments: Trump’s declaration coincided with the signing by 11 countries of a new Trans-Pacific trade pact that the United States withdrew from last year.

The announcement underlines concerns about rising US protectionism and the latest tariffs offset the positive impact from plans also announced overnight for Trump to meet with North Korea’s Kim Jong Un that raised hopes of ending a standoff over North Korea’s nuclear weapons programme, said Kwon Young-sun, an economist at Nomura Securities.

While carrying a message to Washington to push forward a diplomatic breakthrough over North Korea, South Korea’s national security office chief Chung Eui-yong requested US officials to support South Korea’s request for a waiver on the steel tariffs, a South Korean presidential spokesman said.

Trump in January ordered tariffs on solar panels and washing machines imports to the United States.

Exports of these products and steel and aluminium make up less than 1pc of South Korea’s total exports, Young-sun said.

“But broader US curbs and countermeasures from Europe or China could derail the exports environment going forward,” he said.

A senior South Korean official said the tariffs would impact the renegotiation of the bilateral free trade deal with the United States that is currently underway.

The official said ways had to be found to address steel overcapacity in China as South Korea was the top importer of Chinese steel, although shipments from China were 21pc down in 2017 from the previous year.

He said the United States has raised concerns over South Korea’s ‘trans-shipment’ of Chinese steel, although the trade ministry has argued that only 2.4pc of steel exported to the US uses Chinese material.

The official also expect higher US tariffs to put South Korean carmakers, Hyundai Motor and Kia Motors, at a disadvantage in the US market as it would increase their costs.

In Sydney, Prime Minister Malcolm Turnbull sounded confident of getting favourable treatment as Trump spoke of Washington’s strong relationship with Australia, a major exporter of iron ore but exports little steel and the United States was not a major customer.

“I was pleased to see the president acknowledge the strong points I have been making to him. There is no case for imposing tariffs on Australian steel,” Turnbull told reporters in Sydney.

India’s steel ministry said in a note to the trade ministry last month that US import tariffs were expected to lead to a loss of $130m in exports which were expected to total 333,656 tonnes for the year ending on March 31.

European Union Trade Commissioner Cecilia Malmstrom will host her US and Japanese counterparts in Brussels on Saturday to discuss steel overcapacity as part of talks that begin in December at a World Trade Organisation meeting in Buenos Aires.

Shares in China’s steel and aluminium makers fell on Friday morning. Baoshan Iron & Steel was down 3.3pc by 0616 GMT, while Hesteel and Beijing Shougang were down more than 1pc.

In South Korea, shares in Posco were down 3.5pc, while in Tokyo Japan’s biggest steelmaker Nippon Steel & Sumitomo Metal fell 0.7pc by the close.

Chinese steel futures slumped to their weakest level since November.

—Reporting by Adam Jourdan and Wang Jing in Shanghai, Yuka Obayashi, Kaori Kaneko and Ami Miyazaki in Tokyo, Ju-Min Park, Hyunjoo Jin and Cynthia Kim in Seoul; writing by Aaron Sheldrick; editing by Simon Cameron-Moore
—Reuters

Published in Dawn, The Business and Finance Weekly, March 12th, 2018