President Trump and Japanese Prime Minister Shinzo Abe agreed on Wednesday to begin direct bilateral trade negotiations in a move that could reshape two of the world’s largest auto industries and offer American farmers better access to Japanese consumers.
Japan has resisted bilateral talks with the United State for nearly two years, preferring that its closest ally return to the 12-nation Trans-Pacific Partnership. However, President Trump quite that deal in one of his first acts as president.
Wednesday’s decision followed President Trump’s announcement this summer that he was considering imposing potential tariffs at 25 percent on imported automobiles, including from Japan.
It has been reported that Shinzo had little choice but to agree to bilateral trade negotiations given how vulnerable Japan’s automakers are to U.S. tariffs. More than a third of Japan’s 4.7 million vehicle exports last year were to the United States, and two-thirds of its $69 billion surplus with the country was from autos.
Changing that scenario may be difficult. Toyota and Honda make cars Americans want to buy, but SUV’s and pickup trucks rolling off the U.S. production line are of less interest in Japan. Ford had said in 2016 it would abandon the market entirely
The United States and Japan also said they would work together, and with the European Union, to curb unfair trading practices by China. The United States said it agreed to “refrain from taking measures against the spirit” of the joint statement, which seems to indicate that President Trump will hold off on imposing auto tariffs until the talks are concluded.
President Trump made a similar deal with the European Union in July, agreeing to defer any auto tariffs while talks proceed.
The United States and Japan are approaching the negotiations with different objectives in mind. The Trump administration wants American carmakers to enjoy better access to the Japanese market. Abe’s government said it would offer American farmers the same benefits they had won in the TPP agreement that Trump quit but no better terms, according to the joint statement.
The Japan talks will proceed in two phases: a blitz to reap quick gains, followed by a second set of negotiations on additional unspecified “trade and investment items, according to a statement from both countries.
