Japanese Prime Minister Shinzo Abe and President Donald Trump touted the new trade deal at the G7.
Just last week, President Donald Trump was heralding the trade deal he apparently felt was ready to sign with Japan, but he may have been celebrating too soon, according to a report by the Washington Post, which cautions that Japan is pushing back due to the threat that the president might yet impose sanctions of Japanese auto imports.
Just four days in office, Trump scuttled the earlier Trans-Pacific Partnership deal that had been negotiated during the term of his predecessor, Barack Obama. That created a serious problem for American farmers, however, as they were left at a disadvantage to Canadian and Australian rivals who now gained a leg up in accessing the Japanese market by remaining part of the TPP.
Trump’s trade team set off to negotiate a direct deal with Japan, something he last month promised would be “tremendous for the farmers,” and something they clearly need after Trump’s ongoing trade war with China has locked many of them out of that market. But farmers aren’t the only ones hurting as the U.S. continues to wage an assortment of global trade wars.
(Trump Says No Tariffs on Japanese Autos — For Now)
American automakers have also been struggling. And, with Trump facing what could be a tough re-election battle next year, that could cause problems for the Japan trade deal which was on target for completion when the president meets with Japanese Prime Minister Shinzo Abe on Wednesday.
According to the WaPo report, Japanese negotiators are concerned that the proposed trade agreement would leave open the option for Trump to enact tariffs on their auto shipments to the U.S. That is something the president has been threatening to do for some time – along with imposing new duties on European auto imports, as well.
Trump and Abe discussed the trade imbalance between the U.S. and Japan during Trump’s visit earlier this year.
The threat of auto tariffs has become the single biggest obstacle to completing a U.S.-Japan trade deal, but the newspaper says the likelihood such an agreement will be signed during a meeting of the U.N. General Assembly is now “unlikely.”
There is the possibility that Abe may agree to ink a nonbinding statement, Japanese news media are reporting, but it would not have the same power of an actual trade deal and would leave both sides free to withdraw without penalty if, say, the Japanese choose to react to new automotive tariffs.
Whether the prospect of having a much-needed trade deal enacted this week might get American negotiators to preclude future tariffs is unclear. They are clearly facing mounting pressure from farmers who have been hammered by the ongoing trade war with China. Foreclosures and bankruptcies are rising fast across the American heartland despite bailouts that have now climbed to $28 billion, or roughly twice what U.S. taxpayers ultimately shelled out to help save General Motors and what was then Chrysler Corp. from bankruptcy a decade ago.
But the administration is facing pressure from the auto industry and, more broadly, its own position on bringing manufacturing back to the United States. So far, the fight has done little to help the domestic auto industry, according to most analysts, and there’ve only been modest gains to show in the Trump push to bring back jobs from Mexico. The USMCA, the proposed replacement for the old NAFTA treaty, has itself been languishing in Congress for lack of the support needed for passage.
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Tariffs on autos and auto parts have been threatened repeatedly by Trump, even as a candidate ahead of the 2016 presidential election. An investigation by the U.S. Commerce Department that he ordered came back with the necessary justification, concluding in May that automotive imports are a threat to national security.
Trump would not be the first U.S. president to consider steps meant to limit the import of Japanese automotive goods. To forestall earlier threats, the Asian powerhouse agreed to place “voluntary” restrictions on auto shipments during much of the 1990s. Those restraints eventually were lifted as companies like Toyota, Nissan and Honda set up U.S.-based factories that today produce millions of vehicles annually.
Even so, Japan is the second-largest exporter of vehicles to the U.S., with a total value of $40 billion last year. It is number six in terms of auto parts which carried a value of $1.8 billion.
Abe may son a nonbonding agreement that would be terminated if Trump implemented auto tariffs.
Last month, the president said he wasn’t looking to impose tariffs on Japanese autos “at this moment,” though he added that, “It’s something I could do at a later date if I wanted to.”
Several possible moves have been proposed to salvage the U.S.-Japanese trade talks, including both a promise from the president not to impose new, 25% tariffs, as well as a “sunset clause” that would terminate the initial agreement were Trump to impose new duties.
But such moves could be cited by other trade partners, including Europe and China, who might ask for similar language in their own deals.
(China Moving to Offset Impact of Trump Tariffs and Jump Start Auto Sales)
“It seems like the reality has set in on how tough trade negotiations are in practice,” Wendy Cutler, a former U.S. diplomat who helped negotiate the Trans-Pacific Partnership, told the Washington Post. She now serves as vice president of the Asia Society Policy Institute.