JFE Steel President and CEO Koji Kakigi told the Nihon Keizai Shimbun in an interview that the company “may change its tie-up with overseas steelmaker” to cope with protectionist moves by the U.S. and other countries. Kakigi said if additional tariffs are imposed on cars being exported from Japan, the company needs to secure its own production base to deal with Japanese automakers overseas shifting to local production and that gives the company an option to expand investment in its [foreign] business partner.

The Japanese and U.S. governments will start negotiations on a trade agreement on goods (TAG) in 2019. If the negotiations end without any agreement, higher tariffs may be imposed on Japan-made cars when they are exported to the U.S. If that is the case, “It will have a tremendous impact on the steel industry,” Kakigi says.

JFE Steel partners with North American steel maker AK Steel to produce steel materials for cars. But the Japanese company does not have its own production base in the U.S. JFE Steel needs to have a base which allows the company to be involved in [AK Steel’s] management in order to be more flexible in responding to customers’ needs. Kakigi says, “Our tie-up may have to change through such steps as increasing our overseas investment.”

Japan and the U.S. have had trade issues over steel. Subsequently, JFE Steel’s U.S.-bound exports of steel materials for cars are now limited to sophisticated steel plates and some other products. Kakigi says, “Only a limited number of companies can manufacture highly value-added steel materials, such as high tensile strength steel sheets for cars, for which Japan has the largest market share,” suggesting that the products are unlikely to be replaced by steel materials made by other countries.