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TOKYO (Reuters) – Major Asian nations reacted sharply on Friday to U.S. President Donald Trump’s decision to impose tariffs on steel and aluminum imports, warning of damage to relations amid industry calls for retaliation.

Japan said the move would have a “big impact” on the countries’ close bilateral ties, while China said it was “resolutely opposed” to the decision and South Korea said it may file a complaint to the World Trade Organization.

Trump on Thursday pressed ahead with the imposition of 25 percent tariffs on steel imports and 10 percent for aluminum on Thursday, though he announced exemptions for Canada and Mexico, and said exceptions could also be made for other allies.

China, which produces half the world’s steel, will assess any damage caused by the U.S. move and “firmly defend its legitimate rights and interests,” the country’s Ministry of Commerce said.

The tariffs would “seriously impact the normal order of international trade,” the ministry said.

The European Union, Brazil and Argentina said overnight they should not be targeted or would seek exemptions, and both Japan and South Korea said they would ask to be made exceptions also.

South Korea, a key Washington Asian ally, is the third largest steel exporter to the United States, after Canada and Brazil.

Graphic: tmsnrt.rs/2oPeo1z

The U.S. is the world’s biggest importer of steel, purchasing 35 million tonnes of raw material in 2017. Of those imports, South Korea, Japan, China and India accounted for 6.6 million tonnes.

“We should prevent a trade war situation from excessive protectionism, in which the entire world harm each other,” Trade Minister Paik Un-gyu told a meeting with steelmakers.

Trade tensions between China and United States have risen since Trump took office. China accounts for only a small fraction of U.S. steel imports, but its massive industrial expansion has helped create a global glut of steel that has driven down prices.

China’s steel and metals associations urged the government to retaliate against the United States, citing imports ranging from stainless steel to coal, agricultural products and electronics.

It was the most explicit threat yet from the country in an escalating trade spat.

The dispute has fueled concerns that soybeans, the United States’ most valuable export to the world’s second largest economy, might be caught up in the trade actions after Beijing launched a probe into imports of U.S. sorghum, a grain used in animal feed and liquor.

“The cost of a trade war will be tremendous and it will make everyone unhappy,” Junichi Makino, chief economist at SMBC Nikko Securities in Tokyo, said in a report on Friday.

TRANSSHIPMENTS

Trump’s declaration coincided with the signing by 11 countries of a new Trans-Pacific trade pact that the United States withdrew from last year.

The announcement underlines concerns about rising U.S. protectionism and the latest tariffs offset the positive impact from plans also announced overnight for Trump to meet with North Korea’s Kim Jong Un that raised hopes of ending a standoff over North Korea’s nuclear weapons program, said Kwon Young-sun, an economist at Nomura Securities.

While carrying a message to Washington to push forward a diplomatic breakthrough over North Korea, South Korea’s national security office chief Chung Eui-yong requested U.S. officials to support South Korea’s request for a waiver on the steel tariffs, a South Korean presidential spokesman said.

Trump in January ordered tariffs on solar panels and washing machines imports to the United States.

Exports of these products and steel and aluminum make up less than 1 percent of South Korea’s total exports, Young-sun said.

“But broader U.S. curbs and countermeasures from Europe or China could derail the exports environment going forward,” he said.

A senior South Korean official said the tariffs would impact the renegotiation of the bilateral free trade deal with the United States that is currently underway.

The official said ways had to be found to address steel overcapacity in China as South Korea was the top importer of Chinese steel, although shipments from China were 21 percent down in 2017 from the previous year.

He said the United States has raised concerns over South Korea’s “transshipment” of Chinese steel, although the trade ministry has argued that only 2.4 percent of steel exported to the U.S. uses Chinese material.

The official also expect higher U.S. tariffs to put South Korean carmakers, Hyundai Motor (005380.KS) and Kia Motors (000270.KS), at a disadvantage in the U.S. market as it would increase their costs.

In Sydney, Prime Minister Malcolm Turnbull sounded confident of getting favorable treatment as Trump spoke of Washington’s strong relationship with Australia, a major exporter of iron ore but exports little steel and the United States was not a major customer.

“I was pleased to see the president acknowledge the strong points I have been making to him. There is no case for imposing tariffs on Australian steel,” Turnbull told reporters in Sydney.

India’s steel ministry said in a note to the trade ministry last month that U.S. import tariffs were expected to lead to a loss of $130 million in exports which were expected to total 333,656 tonnes for the year ending on March 31.

European Union Trade Commissioner Cecilia Malmstrom will host her U.S. and Japanese counterparts in Brussels on Saturday to discuss steel overcapacity as part of talks that begin in December at a World Trade Organization meeting in Buenos Aires.

Shares in China’s steel and aluminum makers fell on Friday morning. Baoshan Iron & Steel (600019.SS) was down 3.3 percent by 0616 GMT, while Hesteel (000709.SZ) and Beijing Shougang (000959.SZ) were down more than 1 percent.

In South Korea, shares in Posco 0054900.KS were down 3.5 percent, while in Tokyo Japan’s biggest steelmaker Nippon Steel & Sumitomo Metal (5401.T) fell 0.7 percent by the close.

Chinese steel futures slumped to their weakest level since November.

Reporting by Adam Jourdan and Wang Jing in SHANGHAI, Yuka Obayashi, Kaori Kaneko and Ami Miyazaki in TOKYO, Ju-Min Park, Hyunjoo Jin and Cynthia Kim in SEOUL; writing by Aaron Sheldrick; editing by Simon Cameron-Moore

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