Auto exports and surplus a major focus for US in Japan trade talks
Trade representatives from Japan and the United States will kick off two days of trade talks in Washington today. The talks aim to resolve concerns over Japan’s $69 billion trade surplus with the US.
Two-thirds of the surplus is from Japan’s auto exports. President Donald Trump wants to open up the Japanese agricultural sector to address the trade imbalance, while Japanese Prime Minister Shinzo Abe wishes to avoid a 25% tariff on Japanese auto exports.
After striking trade deals with the EU and ten CPTPP countries, Japan has leverage today. These deals have put US beef and pork farmers’ 22% share of Japanese food imports at risk given the lower tariffs now enjoyed by the EU and the CPTPP countries.
Tokyo may be inclined to agree to wrap negotiations up early if the US agrees to tariff-parity with international rivals. Otherwise, Tokyo is in no rush. Trump likely wants an early agreement given the onset of his re-election campaign. Watch for a two-stage agreement process—a quick and easy first agreement followed by a more comprehensive deal on harder issues, like auto exports, down the road.
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