U.S., Japan reach trade deal with 15% tariffs on imported Japanese goods
US President Donald Trump announcing an agreement has been made with Japan. And Janice McGregor is on that part of the story for us this morning from Washington. Janice, this is Trump’s first deal with a major trading partner since he sent out those tariff letters earlier this month. So, what should Canadians be taking away from this deal? Well, let’s start with the compromise they reached in terms of kind of the headline across the board tariff rate. 15% is what Japan has settled for. uh that is lower than the 25% threat that Donald Trump had written into uh his letter uh for Japan. The fact that it’s lower uh perhaps uh part of the reason anyway, we’re seeing some relief on the part of uh the markets overnight. Um this lower rate, it’s important to emphasize to everyone, is not something that the Japanese pay. It is what American consumers and American businesses will be paying on any Japanese goods imported into uh the US. It is effectively a a sales tax at a time of I have to say considerable price inflation and Donald Trump would have had to keep that in mind uh as this negotiation proceeded. it is landing higher than the 10% that was previously applied to for example Japanese cars and automotive parts uh heading into the US. Unlike the UK which got a a 10% rate, the Japanese here have not agreed to a quota a future cap on the the growth of the Japanese auto industry as far as its exports into the US are concerned. And the ambition of that I think is is quite noteworthy on Japan’s part. Japan has had uh sort of a a favorable position with the US in terms of its trade surplus. The trade deficit that Donald Trump focuses on. The fact that there’s more Japanese imports coming into the US than US exports going into Japan uh is something Donald Trump has portrayed as a as a weakness. Uh economists would disagree and would note that it’s probably more a strong sign of the power of the American consumer. But nevertheless, that’s why it’s so interesting to see Donald Trump last night out there bragging about how Japanese companies are apparently, you know, we haven’t seen fine print on this, but he says they’re going to be investing 550 billion dollars into the US economy under this deal. Now, we already know there’s been a deal to inject 15 billion in a a takeover uh by the Japanese of US steel for that industry. Will we see more automotive supply chain announcements follow? What is that going to mean for perhaps some pivoting of Japanese investment away from say Canada and into the US? This has to be a cause for concern. But here is the US president touting his big win last night. Just signed the largest trade deal in history. I think maybe the largest deal in history with Japan and that was done with Japan. They had their top people here and uh we worked on it long and hard and it’s a great deal for everybody. I always say it has to be great for everybody. It’s a great deal. A lot different from the deals in the past. I can tell you that. And here we have to pause and talk about agriculture for a minute because Japan made a pretty historic concession to land this deal. Uh it helped Donald Trump deliver a big win for American farmers by agreeing to open up its notoriously protected uh rice markets uh in particular other agriculture commodities as well. The price of rice though in particular was a major concern of voters when Japan uh Japanese voters went to the polls in their parliamentary elections last Sunday. The governing Liberal Democratic Party failed to secure a majority uh in that election. And the Japanese prime minister won’t play the clip because it’s in Japanese, but he was out trying to save a face a little bit by noting that in this deal, Japan got a better tariff rate uh than any other country had been looking at with the letters that they’d received. uh ones where Donald Trump was concerned about a trade deficit trying to put a good spin on this, but it is awfully hard to see uh this as being a terribly good deal for Japan when you compared this to sort of what they had enjoyed is for example even a year ago. Janice, I want to go back to Donald Trump’s uh comments there where he said that this is the largest trade deal in history. Can you fact check that for us a little bit? Yeah, not so much. uh I pulled the stats and the size if you go by last year’s uh trade volumes of this trading relationship between the US and Japan is about a quarter of the total value of the annual trading relationship between the US and Canada. So by that metric uh you know it’s really hard to see that this could be considered a deal bigger than for example the renegotiation of NAFTA under Trump’s uh first administration. And on top of that we have to remember that this is a deal that uh rather than liberalizing trade is actually adding new taxes to it bogging it down uh wi with with that fresh burden. Um so it really can’t be seen in the same light. Uh, nevertheless, important to note that the US and Japan did not have a preferential bilateral uh, trade agreement uh, between them uh, ever since Donald Trump pulled out of the Trans-Pacific Partnership. Canada in a very different boat. It is part of uh, that Pacific Rim trade deal with Japan. It of course does have Kusma in place with the US. That is why the 35% tariff that Donald Trump has threatened Canada with is not quite as dire because KUSMA compliant goods are exempt from that. notwithstanding the pain of the sectoral tariffs on things like steel, aluminum, and and of course softwood, lumber. So, um we really do need to see and and the urgency for Canada is in dealing with the uncertainty around all of this uh just as much as it is any particular tariff rate. Yeah, absolutely. All right, Janice McGregor for us there in Washington. Thank you, Janice. You’re welcome. [Music]
U.S. President Donald Trump said Tuesday that the U.S. and Japan have struck a deal to lower the hefty tariffs Trump had threatened to impose on goods from its Asian ally. Japan also agreed to invest $550 billion US in the United States and to open its markets to American goods.
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