Japan Considers Retaliation Against U.S. Steel Tariffs

TOKYO—Japan is looking into retaliating against the U.S. over steel tariffs, officials said, a break from the more conciliatory approach Tokyo initially adopted toward its closest ally.

The officials said Japan may tell the World Trade Organization that it believes it has the right to immediately impose tariffs on U.S. goods equivalent to the damage it is suffering from the steel tariffs—a step China has taken.

The move reflects Japan’s irritation about its steel being labeled a national-security threat by the Trump administration and could be intended to send a message ahead of two-way trade talks with Washington set to start in June.

President Donald Trump imposed a 25% tariff on imported steel in March, saying a flood of imports threatened U.S. national security by undermining American steelmakers. Mr. Trump gave many U.S. allies an exemption from the tariffs either temporarily or permanently, but not Japan.

Tokyo’s response initially focused on persuading Mr. Trump to change his mind, but he hasn’t. Instead, the U.S. wants to put the steel issue on the table in two-way talks with Japan aimed at winning broader trade concessions in areas such as autos.

“I think we’re going to move rapidly toward getting something done on trade,” said William Hagerty, the U.S. ambassador to Japan, at The Wall Street Journal’s CEO Council meeting in Tokyo this week.

WTO rules allow nations in some circumstances to impose retaliatory tariffs right away if they believe they have been wronged. A formal case at the trade body can take more than a year to resolve.

“We tried to persuade the U.S. by saying we are friends, and it has not worked. The EU is preparing retaliation. China is retaliating. I still hope discussions between Japan and the U.S. will have a fruitful result, but if not we may have to resort to WTO measures,” said a top Japanese official involved in international economic relations.

The Trump administration says its steel tariffs are legal. When China asserted its right to retaliate immediately—the same move Japan is studying—the administration said China’s actions “have no basis under WTO rules.”

South Korea escaped the steel tariffs by agreeing to a quota on steel exports to the U.S. as part of a broader package to revise their free-trade agreement. Japan would reject a similar concession, according to another person involved in the trade dispute.

The steel problem puts Japan in an awkward situation because Prime Minister Shinzo Abe has built a close relationship with Mr. Trump and the two have pledged to work together to ensure that North Korea dismantles its nuclear and missile programs. The two leaders have played golf together three times.

Tokyo fears it will be pressed to make major concessions at cabinet-level talks led by U.S. Trade Representative Robert Lighthizer and Japanese Minister Toshimitsu Motegi. The talks are set to begin as soon as mid-June, Mr. Motegi has said.

Japan hasn’t brought a case against the U.S. at the WTO since 2004, when it objected to a U.S. method of calculating import duties. After years of litigation, the WTO ruled in Japan’s favor, and in 2012 the two sides reached a deal that led Japan to drop the complaint.

Japan’s possible retaliatory measures could total more than $400 million, equivalent to the value of the U.S. tariffs based on the amount of steel Japan has exported in recent years.

Japan wants the U.S. to rejoin to the Trans-Pacific Partnership trade agreement, which was signed in March by 11 countries including Japan. Mr. Trump pulled the U.S. out of the TPP.

“We understand that President Trump is focused on bilateral trade talks, but still we want the U.S. to join and lead a multilateral framework, like the TPP,” said Hiroshige Seko, Japan’s minister of economy, trade and industry, at the CEO Council meeting in Tokyo. “We will patiently persuade President Trump.”

Write to Megumi Fujikawa at megumi.fujikawa@wsj.com

https://www.wsj.com/articles/japan-weighs-retaliation-against-u-s-over-steel-tariffs-1526558497?mod=fox_australian

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