The US Department of Commerce strikes hard! Nippon Steel faces a 29% tariff barrier, adding uncertainty to the $14.1 billion acquisition.

Against the background of United States Steel Corporation's filing of an anti-dumping complaint against New Japanese Steel Corporation, the U.S. Department of Commerce has decided to impose a dumping duty of up to 29% on New Japan Steel Corporation. This decision comes as New Japan Steel is making a promise to avoid importing steel as they seek to acquire United States Steel Corporation (X.US). The tariff increase targets New Japan Steel's behavior of selling hot-rolled steel in the U.S. at low prices from October 2022 to September 2023. Despite New Japan Steel's promise not to transport steel from overseas factories to the U.S. in order to gain support for the acquisition, the timing of the Department of Commerce's decision may spark political controversy. According to a preliminary ruling published in the Federal Register, the U.S. Department of Commerce has imposed a 29% dumping duty on New Japanese Steel Corporation for selling hot-rolled steel in the U.S. at below normal prices during the aforementioned period. This ruling is part of an annual administrative review of the dumping case that the Department of Commerce has been conducting since the four major United States Steel Corporation manufacturers first filed a complaint in 2016, and was issued on November 13th. It is worth noting that on the same day the news was disclosed, New Japan Steel made a commitment to the United States Steel Corporation union not to ship steel plates from its overseas factories, a key commitment in their $14.1 billion acquisition plan of United States Steel Corporation. However, while the products involved in this commitment are different from those in the dumping case, the timing of the Department of Commerce's decision could be used as a political tool by opponents of foreign ownership, especially by individuals like David McAleer, chairman of the United States Steel Corporation Workers Union. Currently, the two steel companies are awaiting the final decision of the Committee on Foreign Investment in the United States (CFIUS) on the deal. If the new tariffs are confirmed, they will have a significant impact on New Japan Steel, as the tariffs on its hot-rolled steel products will increase significantly from the previous 1.39%. Hot-rolled coils are the benchmark product in the steel industry and are widely used in various fields such as automotive, appliances, and bridges. In response to this, analyst Timna Tanner of Wolf Research Company stated that Japan, as a high-cost production country known for value-added, high-profit products, is unlikely to become a major player in commodity-grade products such as hot-rolled coils. The report did not disclose the specific quantity of illegally dumped steel by New Japan Steel, but domestic steel prices in the U.S. fell by 9.3% during the period of the Department of Commerce's review. Unlike global trade in aluminum and copper, steel prices tend to vary by region. In an email statement, New Japan Steel expressed their respect for the U.S. legal system and stated that they will continue to fully comply with U.S. trade remedy laws while evaluating and addressing the impact of imports on the domestic industry. It is important to note that the Department of Commerce's decision is not directly related to CFIUS's decision on the acquisition, as it is part of an annual administrative review of existing dumping cases, and the reviews of the past two years have been released at approximately the same time. Furthermore, as the incoming U.S. president prepares to begin his second term, he has pledged to implement varying degrees of tariff policies on countries worldwide. Against this backdrop, the Department of Commerce's move to increase tariffs on this foreign steel manufacturer has also attracted widespread attention. The complainants in this dumping case include Cleveland Cliffs Inc., Nucor Corporation, Steel Dynamics Inc., United States Steel Corporation, and the U.S. subsidiary of Swedish steel manufacturer SSAB AB. David McAleer, a long-time critic of New Japan Steel and Japan for illegally dumping steel in the U.S. market, has also strongly opposed the acquisition of New Japan Steel.