Reagan Imposes 100% Tariffs on Japan Goods : Retaliatory Sanctions Aimed at $300 Million in Electronic Products in Semiconductor Dispute

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Times Staff Writers

President Reagan decided Friday to impose punitive 100% tariffs on a wide variety of goods produced by Japanese electronic giants in retaliation for Tokyo’s failure to abide by the semiconductor trade agreement between the two nations.

In approving a recommendation Thursday by the Administration’s top economic officials, the White House decided to put the tariffs into effect about April 17, less than two weeks before Japanese Prime Minister Yasuhiro Nakasone is scheduled to begin a visit to the United States aimed at easing trade frictions.

The tariffs will be targeted to bring in as much as $300 million and designed to punish such firms as NEC Corp., Hitachi Ltd., Fujitsu Ltd., Toshiba Corp. and Oki Corp. by either pricing some of their goods out of the American market or by forcing them to accept substantial losses on U.S. sales.


Little Consumer Effect

But American consumers should not suffer much from the steep tariffs on such goods as color television sets, personal computers, disc drives, power tools and commercial photo film because the products chosen are also manufactured by firms in the United States or other nations that are expected to continue to supply competitive goods at existing prices.

The list of products being considered will be whittled down after a two-week period during which affected Japanese and American companies can comment on the proposed targets.

The tariffs would not be applied to the Japanese computer chips themselves to avoid harming U.S. manufacturers that rely on them for their own products.

The U.S. trade sanctions, the first to be applied against Japan since World War II, are aimed at convincing Tokyo that the United States no longer will tolerate Japan’s inability to live up to promises to provide greater access for foreign goods to its huge market.

“I think there are probably a good many Japanese as well as Americans who have made note of the fact that Uncle Sam had perhaps threatened or talked tough 50 times but had never backed it up,” Commerce Secretary Malcolm Baldrige said.

Trade officials also downplayed fears that the move would ignite a trade war between Japan and the United States, contending that Tokyo is not expected to respond by restricting imports from the United States.


Instead, they suggested, the Japanese government is likely to take further action to enforce last year’s agreement calling for an end to below-cost “dumping” of electronic microchips in other countries and improved access for U.S. semiconductor firms in the Japanese market.

Once Japan can demonstrate that its firms are living up to the agreement, U.S. officials said, the trade sanctions will be lifted. But they said it would be practically impossible for Japan to take any steps quickly enough to avoid the initial imposition of the tariffs.

‘Appropriate Time’

“Japan is a great friend, and we take this action out of sorrow, not because we want to demonstrate American machismo,” said Clayton K. Yeutter, Reagan’s special trade representative. “We’re doing it because we believe that it’s the appropriate time and place for action of this nature. . . . And I’m convinced that the government of Japan will now do its very best to reverse this situation and assure that the agreement is complied with.”

In response, Hajime Tamura, Japan’s minister of international trade and industry, said: “The United States’ decision is completely impossible to understand. We intend to ask for emergency consultations to seek the withdrawal of this decision. If the United States, however, forcefully implements this measure unilaterally against Japan, we will be compelled to consider implementing GATT (General Agreement on Tariffs and Trade) measures or abolishing a part of, or the entire, semiconductor agreement.”

Another high official of the Ministry of International Trade and Industry, who asked not to be identified, refused to elaborate on Tamura’s threat to abrogate the semiconductor agreement.

‘Barroom Brawl’

“We don’t want to get involved in a barroom brawl with the United States” while there is still hope for revoking Reagan’s decision, the official said.


Foreign Ministry officials in Tokyo reported that Secretary of State George P. Shultz called in Japan’s ambassador to Washington, Nobuo Matsunaga, and warned him that Nakasone should “prepare himself psychologically” to face “extremely severe criticism” that he said congressmen were likely to have of Japan.

Before the decision was announced, Yeutter met for about an hour with Matsunaga to explain the action.

U.S. officials named a wide variety of products that would be eligible for sanctions but said they would delay choosing the specific targets until just before the tariffs go into effect.

In addition to Japanese goods that rely on the tiny electronic chips, the tariffs could also be imposed on other products--such as air conditioners, computer tape, floppy discs and refrigerators--that are made by the Japanese firms accused of violating the semiconductor accord.

Color television sets, commercial photo film such as X-ray film and portable radio-tape players are the Japanese products most likely to be subject to tariffs, Administration sources say.

Officials from the U.S. chip industry, who have been pressing since November for the United States to impose sanctions on Japan because of the breakdown of the agreement, remained cautious in their praise of the action.


‘Reasonable Incentive’

“These sanctions should provide a reasonable incentive for the Japanese government and industry to comply with the agreement,” said Andrew A. Procassini, president of the Semiconductor Industry Assn. in San Jose.

The association is calling for the tariffs to remain in place for “a reasonable time,” until it can be ascertained that the Japanese are actually implementing the agreement.

Representatives of U.S. electronics firms said the decision signals a major turning point in U.S. trade policy toward Japan.

“This is a pregnant moment in Washington,” said Ralph J. Thomson, senior vice president of the American Electronics Assn. in Santa Clara. “There is a subdued atmosphere, and the Japanese (company officials) I have seen are deeply concerned. They know . . . this is not seen as some little exercise. This is the real thing.”

Positive Reaction

Congressional reaction to the Administration’s decision was overwhelmingly positive, but lawmakers warned the White House that it should not back down from enforcing the tariffs.

“It is about time the United States retaliated against a violation of a trade agreement,” said Sen. John C. Danforth (R-Mo.), a key legislator on trade issues.


“I hope that today’s announcement is just one part of a new get-tough policy against unfair trade practices,” said Sen. Pete Wilson (R-Calif.), who sponsored a call for sanctions that passed the Senate on a 93-0 vote.

“It is long overdue that we put aside diplomatic niceties and strike directly to defend our international economic interests,” Wilson said. “We have finally fired back in what has long been a trade war with the Japanese. The problem was that Japan was the only one waging it.”

‘Drop in the Bucket’

And Rep. Robert T. Matsui (D-Sacramento), who sponsored a similar resolution in the House, said: “This action we’ve taken today does send a strong signal to the Japanese. . . . But $300 million a year is a drop in the bucket compared to how the Japanese, through dumping and restricting market access, have devastated the U.S. industry.”

Industry officials also cautioned against expecting too much too soon from the White House move.

“The specific effect on the chip industry is nothing right now,” said Norman Neureiter, vice president of Texas Instruments, a major chip producer in Dallas. “We can only hope that they (Japan) will end up respecting the agreement so that U.S. companies have a chance to increase their market shares in Japan. . . . We’ve warned and warned and everybody’s patience has just run out.”

Staff writer Sam Jameson in Tokyo contributed to this story.