Bloomberg is reporting this week that the US and Japan have agreed in principle on a trade deal which will slash Japanese tariffs on U.S. beef, pork and other ag products — but will continue to impose tariffs on Japan’s auto exports.
President Trump announced the deal Sunday and said Japan also would commit to buy large quantities of U.S. wheat and corn.
Bloomberg opined that “Japanese officials may consider that a good deal if they can elicit a promise in return that its automakers will be shielded from threats of more painful tariffs in the future.”
The U.S. President and Japanese Prime Minister Shinzo Abe announced the agreement in Biarritz, France at the Group of Seven summit following a bilateral meeting earlier in the day.
“We’ve agreed in principle,” the President said. “We’ve agreed to every point.” He also referred to a “massive” purchase of wheat and a “very, very large order of corn” that he said would happen quickly.
Abe said only that agricultural product purchases, which would be conducted by the private sector, were a possibility. Bloomberg said that Japanese officials had been “spooked by threats of punitive tariffs on Japanese autos and agreed last September to start bilateral trade talks with the U.S.”
President Trump has in turn come under pressure from U.S. beef and pork farmers, reeling from the trade war with China, “who have also been hobbled by a tariff disadvantage in the Japanese market compared with competitors from signatories of the Trans-Pacific Partnership regional trade deal he rejected.”
The countries have reached consensus on “core elements” and are setting a goal to sign a deal at the end of September during United Nations meetings. Abe also noted that “there is still some work to be done by officials.” If we are to see the entry into force of this trade agreement, I’m quite sure that there will be the immense positive impact on both the Japanese as well as American economies, he said.
Bloomberg commented that “while the proposed deal may provide Trump with a fillip as he heads into his campaign for re-election, it remains to be seen how it will be received in Japan, where some officials have said the country should not give up its leverage over U.S. farmers without substantial concessions in return.” Japanese trade agreements generally have to be approved by parliament before going into effect.
Japanese media reported earlier that the U.S. and Japan had agreed to an outline deal that would lower tariffs on U.S. beef to levels offered to members of the TPP. Japan and the U.S. agreed last year this would be the maximum possible level.
U.S. Trade Representative Robert Lighthizer also commented on the content of the proposed deal, which he said would open markets to $7 billion of products including ethanol, as well as beef, pork, dairy products and wine. He said U.S. tariffs on some Japanese industrial products would be reduced—"but that these would not include cars.”
The farming provisions of the deal won some early praise in the U.S. with the National Pork Producers Council and Senate Agriculture Committee Chairman Pat Roberts among those welcoming a deal they expect “would put U.S. agriculture on an even basis with TPP-member nations.”
President Trump had teased the deal throughout the day, saying he was “very close to a major deal with Japan” and that talks had been held over five months. “Frankly, I think what’s happening with China helps with respect to Japan. But it’s a very big deal. It will be one of the biggest deals we’ve ever made with Japan,” he said.
So, we will see. The President’s heavy criticism of the U.S. Fed and his suggestions of even tougher tariff levies on future Chinese imports sharply weakened U.S. markets ahead of the G-7 meeting and it remains to be seen how that uncertainty will play out in the days ahead—and how the “agreement in principle” will be received amid all of the ongoing tension. These are fights that should be watched closely by producers as they continue, Washington Insider believes.
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