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| US Japan trade deal |
Reduced Tariffs Boost US Auto Production and Steel Demand
The US-Japan trade deal lowers tariffs on Japanese cars from 25% to 15%, which will increase competition in the US automotive market. This agreement encourages Japanese automakers to expand US-based production, potentially intensifying competition against the Detroit Three automakers: General Motors, Ford, and Stellantis. Consequently, increased domestic auto manufacturing will drive higher demand for steel products, especially galvanized and cold-rolled coil. The trade deal also opens the US market more broadly, though the exact scale of production increase remains uncertain.
Trade Deal Financial Terms and Market Reactions
Japan agreed to contribute $550 billion to a US industrial investment fund, easing tariff reductions. This funding aims to revitalize the US strategic industrial base, including critical sectors like semiconductors and energy. Investors reacted positively, with Japanese auto company shares surging, while US automakers saw modest gains. However, the 15% tariff still imposes a cost on imported vehicles. This tariff certainty may encourage US automakers to source metals domestically if prices stay competitive, reducing procurement uncertainties.
Competitive Shifts and Future Market Dynamics
Japanese automakers like Toyota and Subaru may increase US production capacity, potentially eroding market share from the Detroit Three. Yet, some firms such as Honda and Nissan have sufficient North American capacity already. The trade deal could also intensify competition, as Japanese automakers operate both US plants and imports, challenging US legacy manufacturers. Meanwhile, the global shift toward electric vehicles, dominated by China, remains the biggest threat to US automakers. Analysts expect US light vehicle production to remain steady through 2025 before potential growth after 2028.
ScrapInsight Commentary
The US-Japan trade deal will support US steel demand through boosted domestic auto production, especially for galvanized and cold-rolled coils. However, steelmakers must monitor potential shifts in automotive manufacturing and import volumes. Regulatory and labor cost pressures will continue shaping US competitiveness, while strategic investments funded by Japan may strengthen the domestic industrial base and circular economy efforts.
