US-Japan trade deal: half-full or half-empty? | Business| Economy and finance news from a German perspective | DW | 17.09.2019
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US-Japan trade deal: half-full or half-empty?

Donald Trump says his administration will enter into an initial bilateral trade deal with Japan in the coming weeks. But the fate of cars and a currency clause remain unresolved.

US President Donald Trump said late on Monday his administration will enter into a bilateral trade deal with Japan in the coming weeks, ending the trade stand-off between Washington and Tokyo. But reports suggest Tokyo was not quite so sure what had been agreed and on what basis.

The agreement, Trump said, would offer US agricultural producers, many of whom have been hit by the trade war with China, wider access to the Japanese market. This would be in line with the terms of the TPP trade deal, which Trump abandoned in 2017. The US is also expected to lower tariffs on some industrial goods and sign an agreement on digital trade, which would impact US technology companies like Amazon and Alphabet's Google.

But the deal falls short of a comprehensive agreement that would include service industries and many manufacturing goods, including the automotive sector, a key sticking point between the countries.

The currency issue

Japanese finance minister Taro Aso also said on Tuesday that a currency provision, which is aimed at preventing competitive devaluation, would not be included in any deal.

Currencies are a sensitive issue for Tokyo as it has been criticized by the US and others for keeping the yen weak via monetary easing. Japan has been resisting American pressure to link trade with currency issues.

US Treasury Secretary Steven Mnuchin said that in future trade deals, including one with Japan, the US would like to include a provision to deter foreign exchange manipulation.

Auto tariffs a key point

Tokyo also warned that any final deal must include assurances that Washington won't impose new tariffs on $50 billion (€44 billion) of Japanese auto exports. This is a minimum demand for Japan in talks for the so-called "early harvest" trade deal with the US. The US Commerce Department in February found such imports could impair national security.

Japanese Foreign Minister Toshimitsu Motegi said on Tuesday that Tokyo wanted to see the Trump administration end the threat of new auto tariffs before agreeing to a final trade deal.

Farmers unhappy

Under an earlier proposal, Japan would cut tariffs on American agricultural products, including beef, pork, dairy products, wine and ethanol. US Trade Representative Robert Lighthizer has said this deal will cover agriculture, industrial tariffs and digital trade. However, Trump gave no details about what was in the initial deal.

Infografik Herkunft der in den USA verkauften Autos (2017) EN

He clearly wants, however, to offer something to US farmers, who have grown frustrated with his trade policies. Many American agricultural producers have been losing market share to rivals from the EU and Asian nations as their separate deals with Japan have gone into effect.

Stormy waters

After meeting Japanese Prime Minister Shinzo Abe at the G7 summit in August, Trump announced that the two countries had struck a trade deal "in principle" and said they hoped to sign the pact on the sidelines of the UN General Assembly in New York later this month.

But predicting Trump's next move is a dangerous business, and the president has been critical of the US trade relationship with Japan. "We just want to be treated fairly. Japan has had a tremendous trade surplus with the United States for many, many years, long before I came here," said Trump. "We're taking these horrible, one-sided, foolish, very dumb, stupid...trade deals that are so bad and we're making good, solid deals out of them."

The US trade deficit with Japan is the third largest it has with any country.

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