“Japanese companies are facing the widespread impact of the U.S. government’s steel and aluminum tariffs,” the Nikkei Asia review reported Wednesday, saying the U.S. government is using steel and aluminum as raw materials as“Derivatives.” To be taxed, “Companies will have to bear a heavier burden than first thought, covering at least 720 products from construction equipment to cutlery such as forks and knives”.
The report said a wide range of industries were expected to be affected as the US government continued to expand the list of“Derivatives” from the steel and aluminium tariffs. The tax structure for“Derivatives” is complex: each product is first divided into parts that use steel and aluminium, which are subject to a 50 per cent steel-aluminium tariff on the purchase price. The part of the purchase price of steel and aluminium will be removed from the trading price of commodities, so-called“Reciprocal tariff” will be imposed. The US currently has tariffs of 50 per cent on steel and aluminium products from all its trading partners except the UK, and“Reciprocal tariffs” of 15 per cent on Japan.
Faced with complex steel and aluminium tariffs, Yamahiko, a Japanese company that exports lawnmowers to the US, said that because the way the tariffs were calculated was not clear, the company was not able to calculate in detail how much impact it would have on itself. “It is also difficult to pass on costs without explicitly imposing tariffs on steel and aluminium components,” said a source at a Japanese bearing manufacturer
The report argued that a mechanism to extend the steel and aluminium tariffs to “Derivatives” had been in place since Donald Trump’s first term, the aim is to prevent companies from circumventing tariffs by turning steel into screws before it is exported. But in Donald Trump’s second term, tariffs increasingly appear to be aimed at protecting domestic manufacturing, raising further concerns among foreign companies and industry groups.
As recently as early September, the Japanese architecture wrote to the Japanese government asking it to negotiate with Washington to exclude construction machinery from the steel and aluminium tariffs. Japanese companies exported more than 800 billion yen (100 yen) worth of construction and mining equipment to the United States in fiscal 2024, according to the data. In August, such exports fell 26 per cent year on year.
In August, Niigata Prefecture’s Zeta Capricorni river delta, where tableware companies congregate, was hit by tariffs imposed on tableware products such as spoons, forks and knives after they were classified as “Derivatives”. Tableware maker Yamazaki Metals, which exports 20-30 per cent of its sales to the US, fears that consumers will stop buying its flagship products if prices rise. “If consumers don’t accept the price increase, then we will have to consider suspending sales in the US during Donald Trump’s tenure,” said Shoji Yamazaki, vice-president
In July, Japan and the US agreed“Reciprocal tariffs” and a 15 per cent tax on cars and auto parts. Knowing the tariffs made it easier for companies to strategize to absorb the extra costs, but the steel and aluminium tariffs“Changed the game”, because companies continue to face the risk of being added to more categories of“Derivatives”. “We will try to determine the impact and coordinate with the relevant industries,” said Yoji Takto, Japan’s trade minister, on Sept. 19, referring to the expansion of tariffs on steel and aluminum products
The United States Department of Commerce also launched an investigation this month into the need to impose industry-specific tariffs or restrictions on imports of machine tools, industrial robots and medical equipment. The Japanese machine tool industry is reportedly holding its breath as it waits for the final tariff rate.