Trump announces trade deal with Japan, including 15% tariff

Trump announces trade deal with Japan, including 15% tariff

President Trump has announced a trade deal with one of the uh US’s largest trading partners, Japan, which includes lowering tariffs to 15%. Mr. Trump touts this as a massive deal and perhaps the biggest agreement ever made. He says the Asian ally will open up trade, including autos, rice, and other agricultural products. Mr. Trump added that Japan will invest 550 billion US into America. The US leader reportedly met yesterday with Japan’s top tariff negotiator Rios Akazawa who sought to avert 25% terrorists set in a letter sent to Japan earlier this month. And for the very latest, we’re joined by Mitcho Ishida who is in Tokyo. Mitcho, so what’s been Japan’s response to the 15% tariff rate set by President Trump so far this morning? Well, Prime Minister Shuger Ishawa actually spoke to reporters this morning and Mr. Ishba said that he has been notified by his economic revitalization minister Mr. Le Akazawa who’s his chief trade negotiator that he had met with commerce secretary Howard Lutnik, Treasury Secretary Scott Bessent and with President Donald Trump. Now Mr. Shima said he has not received the latest details from Mr. Akazawa yet. But what he can say at this point in time is negotiation with the US started in February. It was about defending each other’s sovereignty and going forward Japan and the US will work together, create jobs, create good products. He said the two countries will be able to contribute to this world. And Mitch, exactly how beneficial is this deal for Japan? Well, Mr. Shig Ishiba has been saying all along that the deal with the US had to be a win-win for both countries. Japan’s been the biggest foreign investor for the US. He wanted the US to leverage on that to cut down on its trade deficit with Japan. Now, important in particular to Mr. Ishiba and uh for the Japan economy is to save Japan’s auto sector. It’s the most important sector for Japan and 1/4 of Japanese exports to the US have been vehicles. In April, US tariffs on Japanese cars rose to 25%. Impact has been immediate. May and June figures show Japan’s car exports to the US fell. Although not yet official, uh Japanese media say there are government for sources stating that tariffs on cars has been lowered this time to 15%. That’s in the latest negotiation. And if all these are true, it’s actually an achievement on the part of Prime Minister Isha and Minister Akazawa even though they lost the latest upper house election. All right, Mitchio, thank you very much for that update. Ishida live there from Tokyo. And for more, we’re joined by Deborah Elms, head of trade policy at the Heinrich Foundation. Deborah, good morning. Appreciate you joining us at short notice. Let’s start with the numbers. 15% versus 25%, we’re hearing the Japanese media apparently caught a little bit off guard, but not in an unpleasant way. So, is it a win-win? Is it a good deal to you at first glance? Well, I think we need to see a lot more details because the question is what was covered and what was excluded. And crucially for Japan, you know, 15% is certainly better than 25, but remember that US tariffs were roughly 2% heading into April. So, you know, this is a significant escalation in tariffs overall. And especially for Japan and other industrialized economies, what matters is not just this reciprocal rate of 15% or whatever it is, but also what is happening on all of these sector specific tariffs that include cars, metals, um semiconductors ahead, pharmaceuticals ahead, etc. where Japan is extremely competitive, those will ultimately matter more, I think, than this whatever this reciprocal rate is uh as we head forward in time. Uh Deborah, not sure if you heard Mitchio earlier on. She mentioned that it is possible that the 15% applies to Japan’s auto makers as well. How important is that going to be that it’s actually 15% and doesn’t stay at 25% which we know applies to all foreign made cars going into the US at this time? Well, I think that that clearly will be important for Japan and that does give them a competitive advantage compared to foreign other foreign investors or other foreign producers of automobiles that are shipped to the United States. Clearly, that is important. Uh but that’s not the only challenge for Japan. You know, many of the vehicles that Japan manufactures for the United States market are made in the US. And so, what matters to them is also auto parts tariffs and crucially things like metals. So steel, aluminum, and all of the derivatives, if those are up by 25%. Then your domestic production in or 50% actually on metals, your domestic production in the United States is also disadvantaged. And so I think you you have to remember that this is a series of moving parts. and you’re trying to think about all the ways that the pieces come together to create either easier or more restrictive trade environment for Japan, Japanese companies, uh, and US companies looking to continue to export to Japan. So, Deborah, President Trump says that Japan will invest $550 billion in the US and hopes to keep 90% of the profits from these ventures. Can you tell us how this might work and also how this deal could create hundreds of thousands of jobs as he says? How do you see all this panning out? Uh I think we need to see the details on that one. I mean he also declared that this is the biggest trade deal ever. And I would suggest it is not no matter what is in this agreement. The deal with the United States has had with Canada and Mexico is a far larger agreement than anything that the US and Japan are likely to have accomplished. So, I think as always with Trump, you have to take his pronouncements with a very, very heavy dose of salt and see what the details are at the end of this. And and I’m sure that if Trump in fact managed to get a half a billion dollars of investment or more uh and keep 90% of the profits, everyone around the planet is going to be looking for how that was done because they would like to replicate the same conditions. Uh to keep 90% of anyone else’s profits is quite remarkable. We’ll see what happens when you see the details. So Deborah, based on, you know, the so-called agreements signed so far with the likes of Vietnam, with Indonesia, and also the Philippines, apparently uh the United States is going to have full access, tariff-free into the three countries I mentioned. But apparently for Japan, it’s sectoral access, not full access to sensitive Japanese areas. I think you mentioned some of them including uh the auto sector rice agriculture as well. Again I want to ask you you know how important is this for the Japanese economy and and the local sectors but also I guess for the prime minister who is who’s I guess under a bit of political pressure at this time. Well first of all let me back up and say again nothing’s been signed. So these are announcements that are made by tweet. We don’t know what the details are with any of these economies and those that have been done earlier like with Vietnam and and now with Indonesia, we still don’t have the details. Vietnam was officially concluded a few weeks ago. No details and a lot of arguments behind the scenes still over what was actually agreed uh and particularly what was agreed on how much market opening are these economies going to give the United States. Trump says full access at zero tariffs. That was apparently not what was agreed with Vietnam, with Indonesia, probably with the Philippines, and my guess is with Japan. So again, you know, it’s great to pretend that Trump is giving you the completely accurate description of these agreements, but until we see what actually was on the table and where we stand, I think we should be very skeptical about these sweeping promises. Uh, and we can’t really put numbers, for example, on how large the benefit might be, what the benefit might be, or the damage to the domestic economies until we see more of these details. You know, it’s one thing to treat this all as a great game of entertainment, which I know is how many folks in the media and perhaps the listening public likes to think of it, but these are real people’s jobs that are on the li the line here, right? So, if you have a tariff that is high or a tariff that is low, that affects how many domestic jobs you have. That affects whether people can actually feed their children. So, I think we need to be careful about treating uh an announcement by tweet as if it was an actual document. And we need to remember that there are real consequences to whatever was agreed to. This is not actually a game. This is this is real. And are you able to see any more clarity on that note on how these tariffs have been calculated so far with the deals that seem to be firmed up? The Japan one was just struck with a weakened is Ishiba government. The Filipino one reduced marginally and they’re a big ally. Indonesia and Vietnamese with greater deficit disparity. So if you’re in the discussion queue, what can you glean from all of this, especially in terms of balance? Well, I think the the key is that it’s very fluid and the situation, as one might expect, is likely to change. It could change overnight. It could catch you completely offguard. There could be an announcement made via tweet that you either were or weren’t expecting that either does or doesn’t include information that you had talked about. And so you need to be happy that you are not getting a worse situation. I think that’s delightful. But you also need to be very cautious about how that might how a tweet could end up locking you into a position that you actually didn’t think you were in. Uh and then how that gets unwound in the future. And as with everything Trump related, whatever agreement you think you may have could be subject to change without notice at any time. And so, you know, this is obviously it’s better to have a deal than to not perhaps it might be better to have a lower number than a higher number, but those numbers are likely to be back in the headlines again and again and again for as long as Trump remains in the White House. He loves tariffs. He will continue to use them uh whenever he feels threatened, cornered when he would like to turn the attention back to him. So, any deal announced via tweet is not likely to be stable. It’s good to hear from you. Thank you so much, Deborah Elms, head of trade policy at Heinrich Foundation.

United States President Donald Trump on Tuesday (Jul 22) announced a trade deal with Japan that he said will result in Japan investing US$550 billion into the US and paying a 15 per cent reciprocal tariff. Deborah Elms, head of trade policy at the Hinrich Foundation, tells CNA’s Asia First why it may be premature to label the US-Japan trade deal a win-win situation.

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