US economy

Tepid response in Japan to news of US trade deal

The broad outlines of a US-Japan trade deal and assurances from US President Donald Trump that he is not planning to impose tariffs on Japanese automobiles “at this moment” have met a tepid response in Japan.

Immunity from threatened tariffs on its car exports is a minimum demand for Japan in talks for a “mini” or “early harvest” trade deal with the US. Mr Trump and Japanese prime minister Shinzo Abe announced an agreement in principle on such a deal at the G7 summit last weekend and aim to sign it in September.

Speaking at a press conference after the G7 in France, Mr Trump said he was not considering automotive tariffs on Japan at present. “It’s something I could do at a later date if I wanted to, but we’re not looking at that,” he said.

But Mr Trump was fiercely critical of the US trade relationship with Japan, signalling that any reprieve from tariffs may not last and raising questions about what, if anything, Japan will gain from striking a deal with Washington.

“We just want to be treated fairly. Japan has had a tremendous trade surplus with the United States for many, many years, long before I came here,” said Mr Trump. “We’re taking these horrible, one-sided, foolish, very dumb, stupid . . . trade deals that are so bad and we’re making good, solid deals out of them.”

Yuichiro Tamaki of the opposition Democratic Party for the People said, however, that Mr Abe had been cornered by the US. Nobuyuki Baba, secretary-general of the Japan Innovation party, an opposition party that usually backs trade deals, said: “It’s hard to see the merits for our country”.

Tobias Harris, senior vice-president at Teneo in Washington, said that Mr Trump’s statement was better than nothing for Mr Abe, but it raised questions about whether the proposed trade deal would include binding language to protect Japan from future US tariffs.

“Imagine the domestic backlash for Abe if after reaching a deal Trump nevertheless threatened Japan again with auto tariffs over some other issue,” he said.

No details of the planned US-Japan deal have been released, but the broad outline is a reduction in Japanese agricultural tariffs to the levels agreed in the Trans-Pacific Partnership, a regional trade pact from which Mr Trump withdrew.

In return, the US will cut some industrial tariffs. Unlike in TPP, however, the US will not cut its tariff on passenger cars.

That will leave Mr Abe trying to sell a deal that is visibly worse than the TPP. Early political reaction in Tokyo suggested that ratification by the Japanese Diet will not be straightforward, with lukewarm comments from members of Mr Abe’s ruling coalition and hostility from opposition parties.

“The Trump administration — by simultaneously celebrating Japan’s concessions while offering virtually no public details about US concessions — is making matters significantly harder for Abe,” said Mr Harris.

Economists said that the outline deal would do little to boost Japan’s economy although protection from automobile tariffs would be welcome. Meanwhile, Japan’s farmers fear they will be exposed to huge foreign imports of beef.

The Trans-Pacific Partnership included a safeguard whereby higher tariffs would kick in if beef imports to Japan from member nations exceeded a certain quota over 12 months. That quota was set assuming the US was part of TPP.

Now, not only will the TPP nations have their quota but the US is likely to have a separate quota as well, reducing the protections for Japanese farmers. 


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