Trump Concludes Trade Negotiations with Japan
The United States and Japan reached a trade agreement last Wednesday regarding Japanese agriculture and digital products, which may worsen Japan’s already unstable economy. Although the agreement is considered progress, as trade tensions rise in other areas, Japan is looking to Trump in hopes that he will make similar concessions to car tariffs in the next round of negotiations.
When Japan signed a bilateral trade agreement with the EU in 2018, the agreement lowered the tariffs imposed on agricultural goods to countries like Germany and Netherlands below the levels of those to the United States, which undercut the industrial prices in the U.S. Trump’s trade negotiation intends to interstratify the negative outcome by reaching a free trade deal that reduces import tariffs on agricultural goods like beef, dairy products, wine, and other produce, while implying to the Japanese government that the U.S. may cut automobile tariffs in exchange.
Nevertheless, no tariffs on the automobile industry were cut—instead, tariffs on some goods, such as soy sauce and green tea, were abolished. The Obama administration promised the eventual abolition of car tariffs, acknowledging that they are the largest exported commercial good of Japan, while President Trump’s decision on the trade agreement had shown that he does not intend to maintain that promise.
Japan had elaborate objectives in which both goals were achieved in the trade agreement - as the world’s largest net food importer, they prioritized preventing a substantial cut on agricultural import tariffs and a 25 percent prohibitive tariffs by the U.S. on Japanese cars. The aforementioned criterion was temporarily achieved, which came as a relief as trade tensions continued to rise between the U.S. and China, which is already hurting Japan’s exports.
The U.S continues to be Japan’s top agricultural supplier, despite challenges posed by other countries such as China, Australia and Thailand. As the agreement becomes finalized, the Japanese agricultural market share is anticipated to increase, in terms of imported goods, by 8.6 percent.
In the next stages of negotiation, it is inevitable that Japan will face stronger, harsher sanctions and proposals which intend to damage their efforts in abolishing tariffs on car exports. As the 2020 election approaches, President Trump’s primary concern is to please the farmer votes in the midwest. The United States may introduce measures to, again, cut trade deficits on cars since 80 percent of U.S. trade with Japan comes from cars and automobile parts.
Events threatening Japan’s already problematic economy are not only from the United States, but also emerge from the environmentalist global trend that has resulted in the promotion of clean energy powered cars. Relying heavily on its car exports, Japan’s government urged businesses to go completely battery-based by 2050. However, Japan’s neighbor, China, has already started on a similar project challenging Japanese cars exports to the United States. If the Chinese are successful, the Japanese economy may face backlash from its negotiations with the U.S. both locally and globally.