Trump announces ‘massive’ trade agreement with Japan

Trump announces ‘massive’ trade agreement with Japan

New. This morning, President Trump touts a trade deal with a major trading partner. But I just signed the largest trade deal in history, I think maybe the largest deal in history with Japan. And that was done with Japan. You know, this new deal with Japan, you can see stock futures this morning up some up a little bit before the opening bell. We’ll see where it goes once the markets open at 930. CNN’s Matt Egan is here to talk about this deal with Japan, which is a major trading partner. Yeah, absolutely, Jon. And look, for weeks it felt like all we were getting was escalation on the trade front. Now we’re starting to get a string of deals. The biggest one being this US Japan deal. Let’s go through some of the things that are in this. So a 500 plus billion dollar investment from Japan into the United States. We’re still waiting. Some of the key details on that. But a Japanese official says that this is going to be an investment into key industries like pharmaceuticals and semiconductors. Japan also, according to President Trump, agreeing to open up trade with the US on cars, rice and other agriculture. Now there’s this 15% tariff the U.S. is going to charge on imports from Japan, and that tariff extends to cars and car parts. However, a 50% tariff still remains on steel and on aluminum. Now, just to remind you of where we are when it comes to U.S. tariffs on Japan, back in early April, the president threatened and actually briefly imposed a 24% tariff on Japan, one of America’s closest allies. And in just over a week, tariffs from the U.S. and Japan were set to go up to 25%. This deal again says 15%. So better than the worst case that a lot of people had been worried about. But also higher than tariffs, of course, had been before the president took office. Now Japan is a major U.S. trading partner. It’s the fifth biggest source of imports into the United States. Last year alone, the U.S. imported almost $150 billion of goods from Japan. That was far as the market reaction. We looked at U.S. stock futures moving higher, not dramatically higher. But I should note the Dow is just a few hundred points away from its first all time high since December. We’re seeing a more emphatic reaction from Japanese markets, the Nikkei spiking more than 3%, and auto stocks Japanese autos stocks that trade in the U.S., Toyota, Honda moving dramatically higher, more than 10% higher for Toyota and Honda apiece. And that’s because, again, there’s possibly a competitive advantage here, right? Autos that are being imported from Japan face that 15% tariff. They avoid the 25% tariff. But I should just note that one group that does not seem happy about this is the Detroit automakers. Reuters is quoting a trade group that represents GM, Ford and Chrysler owner Stellantis. And they’re saying that any trade deal that charges a lower tariff for Japanese imports with very little U.S. content, then what’s being charged on North American imports would be a bad deal for U.S. industry and for U.S. autoworkers. That’s really interesting. So 50% is quite high, but it’s lower than the 25% that they were charging Japan, and it’s lower than the 25% or so on. Parts and things coming from Canada and Mexico in so-called American made cars. Yes. Yeah, absolutely. I mean, it’s everything’s become so kind of turned upside down in the last few months during this trade war that we’ve kind of become numb to some of these numbers. But now it’s all about how tariffs relate versus other countries. And again, the thinking right now among investors is that Japan could get a bit of a competitive advantage here. Wow. Okay, Maddie, and thank you for explaining that so well. An angle I hadn’t thought of yet. Appreciate it okay. It is really interesting how interconnected and in new and different ways this trade war is now becoming. Let’s discuss this. Joining us right now is Republican strategist Malik Abdul and CNN political commentator Paul Begala. Gentlemen, it’s good to see you. Let’s start on this. And then you know exactly where we have to go. This the saga that only Washington cannot give up for sure. Paul, you’ve got this trade agreement with Japan. Trump calls it massive. Japan seems happy about it. Markets are floating near record highs despite all of this tariff uncertainty. Yes, GM says it’s taking a hit. Yes, U.S. automakers seem to not be happy. But is Trump’s approach to trade becoming a political win that Democrats didn’t expect? No way is not a political win to raise taxes on the middle class, to hurt the American auto industry, to help the Japanese auto industry 15% tax on any Toyota Camry you want to buy 15% that that’s not. No middle class American wants to do that. Meanwhile, Mr. Trump has just signed the biggest tax cut in history for the rich. So tax cuts for the rich, tax increases for the middle class. Democrats can run on that. It is interesting. I mean, how does how do Republicans respond to that? Because what Paul is saying in terms of the tariff rates and the fact that this trade war even began, it was only started by Donald Trump. Well, thank you so much for having me. I think Republicans should respond to it based on the facts. And if you look at the facts of what’s happening here and what happened earlier on, there was a lot of consternation, a lot of noise being created around tariffs, because it’s something that presidents of the United States haven’t had as far as their economic agenda Donald Trump has, and all of the gloom and doom that was predicted as far as the tariffs are concerned, they have not been realized. So I think that you’ve seen what the markets are saying. You know, you have the great numbers that you just we’re talking about here. Until people actually feel the impact of whatever this gloom and doom scenario is. That’s when it will probably hurt Donald Trump. But at this point, Donald Trump’s tariffs, pork tariff policy seems to be working. And I think it’s very difficult for Democrats to actually give him credit for that. Talk about what the facts are and the facts are. It’s working. Joining me right now is Mary Lovely, a senior fellow at the Peterson Institute for International Economics. Thanks for being here. The president calls this a massive trade deal with China. How big is it? Japan. Rather. Sorry. Yeah, well, it’s understandable there’s so many deals being negotiated right now. It’s it’s not a massive trade agreement. It is an agreement in which the Japanese open up their markets in some important ways, but basically swallow a 15% tariff on their exports to the United States. This is good news for Japanese autos who were facing 25% and now reportedly will face 15%. We’re seeing that in the markets today, the sense of relief, but it’s still a far away from where we were six months ago. And the impact, on autos is important to focus in on here because you also have at the same time, GM just announced yesterday that tariffs cost them $1.1 billion. In the second quarter, Stellantis announced that tariffs had costed some $350 million in the first half of the year. I mean, we’re talking about when you talk about GM, that’s America’s biggest automaker. I mean, can you put this in perspective for us, how significant this is, what we are hearing now from U.S. automakers. Well, in the interests of trying to shore up the U.S. automakers, I’m afraid the government has been adding enormous amounts of costs and uncertainty to automakers and their plans for new models. The, automakers, both transplants and domestic brands, have been warning for months the tariffs were going to create havoc with their planning, their costs, their operations, their exports. And we’re seeing those chickens come home to roost in these earnings numbers. U.S. automakers use imports as a way to reduce the costs, particularly of models they sell in fewer numbers and raising the costs of the imports of those parts and vehicles really does cost them in terms of, the bottom line. We have to remember, also, Kate, that they have been subject to enormous amount of uncertainty in the U.S. plans for dealing with climate change, investments in plans that they had made for, battery ventures for new assembly plants have either been mothballed or put on hold, and charges have to be made for those losses. So all in all, the U.S. auto industry has just been sort of yanked back and forward. Bottom line, we’re going to see higher prices and probably fewer exports as U.S. loses competitiveness around the world. Because I was going to ask America’s GM, I found interesting, also said that there was no immediate plan to hike prices specifically to cover the greater costs associated with tariffs. My question is, how long do you think automakers can absorb this new cost? Well, of course, as economists say, all else equal, we have to think about what’s going on with the economy. If auto prices are softening, it’s going to be harder for automakers to pass those costs along immediately. But eventually the market demands a certain return. on auto stocks, those costs are going to have to be passed through to consumers, if not now, because auto sales are softening in the future. as they begin to tighten up. So we are already seeing price increases in other areas in steel, in tomatoes, in other sorts of goods and services that are influenced by these tariffs. And we will absolutely see it in autos. Just one other point that’s worth noting is that we’re going to see fewer models being brought into the United States and fewer models being made by U.S. producers. So US consumers are also going to face reduced variety, when they go auto shopping. Mary, it’s great to have you. Thank you so much for your time.

President Donald Trump announced a long-awaited trade agreement with Japan on Tuesday night, a framework between allies and major trading partners that appeared elusive just weeks ago. #CNN #News