By on August 27, 2019

Image: FCA

There’s good news if you’re a U.S. farmer, however. A preliminary deal reached between the two countries this week would keep existing auto tariffs in place, though President Donald Trump claims there’s still the possibility of a hike.

It was the threat of import tariffs that brought Japan to the table following the U.S.’s 2017 pullout of the Trans-Pacific Partnership, and the agreement in principle announced this week keeps new tariffs off the table, though auto groups continue demanding action on an issue Lee Iacocca used to rail about: reciprocity.

Trump and Japanese Prime Minister Shinzo Abe signalled an agreement on the core principles of the deal during the G7 summit in Biarritz, France on Sunday. That city, by the way, is surely well stocked with Cadillacs.

As reported by Reuters, the preliminary deal would cut agricultural tariffs and potentially spell a boon for U.S. producers of beef, pork, corn, wheat, wine, and other products. Certain Japanese industrial goods would be exempted from tariffs, as well. The deal aims to generate new demand for U.S. products hit hard by the ongoing U.S.-China trade war, as well as making the United States more competitive with TPP-signed nations.

“If you say ‘win-win,’ it’s a capital letter ‘Win’ for the U.S. and a small-letter ‘win’ for Japan,” former Japanese ambassador to the U.S. Ichiro Fujisaki told The Japan Times.

Not exempted from existing tariffs are Japanese cars and trucks. Inbound passenger cars will retain a 2.5-percent tariff, with trucks saddled with a 25-percent import levy. When asked about the possibility of following through on earlier tariff threats, Trump responded, “Not at this moment, no, not at this moment. It’s something I could do at a later date if I wanted to but we’re not looking at that.”

For the Detroit Three, in this case represented by the American Automotive Policy Council, the preliminary deal sparked a take on the age-old labor question “What have you done for me lately?”

“Any potential trade agreement with Japan should lead to truly reciprocal market access for U.S. automakers,” AAPC president Matt Blunt said in a statement. “It must address long-standing non-tariff barriers in Japan, and include strong and enforceable provisions that prevent Japan from manipulating its currency to gain an unfair and unearned advantage for its auto exports.”

The vast majority of the trade deficit between the U.S. and Japan — $56 billion — stems from the lopsided flow of automobiles.

[Image: Fiat Chrysler Automobiles]

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29 Comments on “At Least for Cars, Preliminary U.S.-Japan Trade Deal Keeps the Status Quo...”


  • avatar
    ccode81

    Would it make Matt happy if I buy that Italian car on photo in Tokyo?

  • avatar
    FreedMike

    “Reciprocal market access”…for what? F-150s?

    It’s been said before, but the key problem with the whole “reciprocity” argument is that Japanese consumers aren’t much interested in American-made vehicles – we’re out of the small car business, and we’re exiting the mid-size business. That leaves what…trucks? Giant SUVS? Good luck selling those in Japan.

    • 0 avatar
      Mnemic

      That is a lazy, tired and weak argument. SUV’s, CUV’s, trucks, muscle cars – everything can and will sell if its actually allowed to. I remember years ago GM was celebrating because they sold 500 camaros in Japan. 500 was all that Japan was allowing to be sold there, LOL!

      • 0 avatar
        FreedMike

        So…per your info, they sold 500 Camaros…in a country with 126 million people. OK, let’s work with that. Let’s say the market is “unlimited” and the actual market for Camaros is 2,000 a year – a 400% increase. That really means they’ll “buy anything we send them”? Yes, I’m sure they would – IF they didn’t get taxed to death on that kind of vehicle.

        But back to the Camaro Success Story. We’re sending them 400% of what we used to send them (and 10,000 F-150s, and 10,000 Tahoes, and so on). We’re not sending them midsizers or small cars because the D3 are out of that business, or will be very soon. That leaves what…trucks, SUVs and muscle cars? Meanwhile, they’re sending us *****a little under 2 million***** cars a year.

        Do you really think there’s a two-million-car market for stuff like Camaros, F150s and Tahoes in Japan? If so, I don’t think you know Japan very well.

        • 0 avatar
          Lou_BC

          My son was in Tokyo as part of an exchange student program. Cars are tiny because space is at a premium. The student who came and stayed at my home was blown away by the space we had. He was from a wealthier family so had a small car and a “detached” home.
          You aren’t going to flood their market with F150’s and Camaro’s because: a. most people can’t afford them and b. most people can’t fit them anywhere!

        • 0 avatar
          Peter Gazis

          Vehicles Made in U.S.A smalll enough for export to Japan
          Acura IXL, TXL
          BMW X3
          Cadillac CT4, CT5, XT4
          Chevy Bolt, Sonic, Camaro, Corvette
          Honda Civic
          Hyundai Elantra
          Nissan Leaf
          Subaru Impreza
          Toyota Corolla

          • 0 avatar
            Lou_BC

            @Peter Gazis – a USA Honda Civic or Toyota Corolla is considered a larger car in Japan.
            A Camaro or Corvette would be HUGE and buyers would be very wealthy. A wealthy buyer would not find prestige in a Camaro or Corvette.

            The collective *we* look at the world through our middle class Canadian or American lens’s and then wonder why the rest of the planet does things differently. Then default to the position that *they* are blocking *us*.

          • 0 avatar
            James Charles

            Peter,
            Other than Caddy, Vette/Camaro and maybe the X3 the other vehicles in the list are produced in Asia. These vehicles are low volume in Japan.

            The US will not sell the same vehicles that are already manufactured in Japan and Asia for 2 reasons;
            1. US equivalents are more costly,
            2. uS built is lower in quality, real and perceived.

          • 0 avatar
            James Charles

            Lou,
            Many do look at the world through a middle class lens in the US. Good comment.

            The problem for the US is it does have a significant number in the middle class, but an even larger lower class that can only afford to buy the prime vehicles of the EU, Asia etc. Hence the large number of these vehicles imported into the US. Then add the uncompetitive US vehicle manufacturing sector and you have the problem you have now.

            This doesn’t take into account the inability to operate larger vehicles in more congested and older infrastructure in Asia/EU.

            The US needs to build competitive products for these different markets, plus build up brand image. GM or even Ford doesn’t cut it in many markets in Asia like Toyota and Honda. They are viewed equivalent to any low quality consumer product, almost as bad as a Chinese vehicle, but more expensive.

            Lots of work and money invested if the US wants to exploit global markets. BMW and MB are really the only worthwhile US vehicle exporters at the moment.

          • 0 avatar
            Peter Gazis

            Lou_BC
            Actually the Civic & Corolla are among the best selling vehicles in Japan. Besides the point

            The U.S. is Lexus’s largest market. Accounting for 60% of all the Lexuses sold. Why aren’t more Lexuses being built here?
            Until recently the Prius was very popular in North America. Most of the Priuses ever sold were sold in North America. Why was the car never built here?

            Last year, Toyota added a 3rd shift in Tijuana Mexico. To build more Tacomas. It is the only Toyota assembly plant outside Japan running on 3 shifts.
            San Antonio Texas builds Tacomas & Tundras (2 shifts)
            Canada builds some RAV4s & some Lexus RXes (2 shifts). Canada until recently built Corollas ( production moved to Japan)

          • 0 avatar
            DenverMike

            “…BMW and MB are the only worthwhile US exporters…”

            @BAFO – You’ve been saying this for years, and it’s still dumb. If Ford built the F-150 in Germany, it would dominate all exports.

            Then aren’t Ford and GM correct by ditching low-level compacts, abandoning Europe, avoiding Japan and others? Even after settling tariffs and other global BS, most of those places are overrated, especially Japan.

      • 0 avatar
        Ce he sin

        It is however a true argument. Mercedes manage to sell 60,000 odd cars in Japan. If they’re able to figure out what Japan wants and supply it, what’s stopping GM?

        • 0 avatar
          FreedMike

          It could be the fact that Japanese folks really like well-made prestige sedans, and GM isn’t particularly strong in that market. I mean, if you really want to compare Mercedes sedans (or smaller CUVs, for that matter) with Cadillac, OK…

          Fact is, if it weren’t for Escalade, Cadillac would be dead *here*, and I can’t see folks lining up for those in crowded Japanese cities.

          • 0 avatar
            DenverMike

            Japanese rules and regulations are difficult for Big 3 automakers to navigate, and much is lost in translation.

            Except Japanese regs are very similar to EU regs so importing Mercedes, BMW, etc autos to Japan is a snap.

            Not everything is about “Prestige”. Check VW sales in Japan. Yes the Big 3 have been killing off most of their compacts and midsize sedans, but that’s only relative recent history.

            Japan and EU regs require extensive “proof” and docs, while US regs are “trust” based and comparatively simple/easy. Why do you think VW so easily made fools of the EPA and got away with it for years?

            Yeah no one is expecting the F-150, Tahoe, etc, to set any market outside of North America on fire, especially Japan, a right-hand-drive county. England would be a better target.

          • 0 avatar
            Mnemic

            Your “I can’t see” isn’t a viable business case. They’ll buy whatever we send them under a new agreement where they aren’t tarrif’d or taxed up the ying-yang. Same goes for Europe. Hmmm a BMW M4 or a Mustang GT PP2 or Camaro SS 1LE that’ll wax its azz for half the price and is worth more money in 5 years. Not a hard decision

          • 0 avatar
            FreedMike

            If the problem is the trade imbalance, we’re talking about millions of vehicles here. A few thousand Camaros and Mustangs, no matter how cool they are, fixes that? Nope. Selling high-volume models fixes that. The only vehicles Americans make that are selling in large enough volumes to somehow reverse that trade imbalance are trucks, large SUVs, and maybe some midsize or small crossovers (many of which aren’t even made in the U.S. anymore). Last I checked, Japanese folks aren’t wild about any of those vehicles. How do I know that? Simple…their homegrown manufacturers make all of them for OUR market, and don’t make them there. The stuff that sells in volume here represents a niche in their market. Would I like to see more of it sold there? Of course. Am I holding my breath waiting for Japanese people to adopt those kinds of vehicles en masse? No.

            I could see Jeep making inroads easier than anyone with something like the Cherokee and Grand Cherokee.

          • 0 avatar
            Lou_BC

            @Freedmike – Ironically this so called trade deal was necessary because bailing on TPP made things worse for the USA.
            “The United States had agreed a comprehensive trade agreement with Japan as part of the 12-nation Trans-Pacific Partnership, but Trump withdrew from that pact on his third day in office. As a result, U.S. exporters have been losing sales in Japan to the remaining TPP nations and the EU, which has a separate trade pact.”
            One again we see “big deals” being signed that repair self inflicted orange wounds.

          • 0 avatar
            DenverMike

            Right. There’s little to be gained at best. Same with the EU market. But collectively, plus a few offtrack and obscure markets, not to mention the Australia/Africa/SE Asia regions, there might be something there.

            If F-series was offered in every market in the world, it could possibly double its global volume.

            Had more markets been open to Big 3 brands, whether we’re talking tariffs or non tariff barriers, things could’ve turned out quite differently for the relationship the Big 3 have had with smaller cars.

            Remember Toyota and Nissan were primarily and historically makers of smaller cars. But the US and its openness to import automakers provided the huge opportunity for both to expand to larger vehicles and trucks not designed or intended for Japanese consumers.

          • 0 avatar
            James Charles

            Lou,
            We need to see more of the fine print on this deal.

            After reading some Japanese newspapers the Japanese are angry with Abe.

            The US farmers are losing faith in the extreme right and Trump.

            As Trump said “,Tradewars are easy to win”. Trump needs to realise for every upside there is a downside, sometimes the downside is greater than the upside.

        • 0 avatar
          Peter Gazis

          That’s nothing Toyota sells 2.5 million vehicles a year in Japan. If Japan wasn’t full of sh!t maybe Toyota wouldn’t be cutting shifts in Georgetown Kentucky.

      • 0 avatar
        HotPotato

        Disagree. What do we make that’s suited for local Japanese conditions and desires? Not much, other than maybe the Chevy Bolt: the car for those who’d buy a Honda Fit if only it were much faster, much quieter, and much more expensive.

        Jeep Renegade maybe, but it’s Italian.

  • avatar
    bullnuke

    Anyone who has spent time in Japan would know why there are size/hp/displacement regulations in that country and why our larger “American-sized” vehicles which include Explorer’s, Acadia’s, Equinox’s, et al, do not sell there. They simply don’t fit well in their cities. Yes, and the regulations governing vehicles are onerous and, yes, these regulations were designed also to help keep non-JDM cars out of the market. Someone mentioned Mercedes-Benz and, well, even in Japan this marque has quite a bit of cachet attached to it and there is some amount of elite pride in such ownership but a Ford, Chevrolet, or FCA product? YGTBSM.

    • 0 avatar
      Peter Gazis

      bullnuke

      Mustang? Camaro? Corvette? Chevy Bolt? If Japan was as open as it says it is a few thousand of each of these vehicles would be sold there a year.
      Ford could also bring in small vehicles from Europe. GM could bring in small vehicles from South Korea.
      Same xenophobic B.S. Japan has been pulling for half a century. Kodak film, Microsoft Computers, Apple iPhones. T.Vs, VCRs, the years change. The B.S. stays the same.

  • avatar
    Fred

    75% of Japanese cars sold here are built here in America. Some 500,000 are exported. Over 2 dozen plants, R&D, 100,000s of employees. Maybe Trump should leave well enough alone.

    • 0 avatar
      Peter Gazis

      Fred

      B.S. You are including vehicles made in Canada and Mexico in your Made in America numbers.
      When only looking at vehicles made in the U.S.A the number drops to 50%

      • 0 avatar
        Fred

        Yea you’re right, I got those numbers from a Ohio newpaper, but they kept interchaning North America with America. I’m standing by my assessment, Japan has probably made more investment into the US, Canada and Mexico than any other country automobile wise. Except maybe Fiat, but that doesn’t count. I don’t see any reason to mess with that relationship. Deal with China, but leave the rest of world trade alone. If Wall Street is right, then it’s only going to come back to bite us.

  • avatar
    Lokki

    I’m with FreedMike on the lack of Japanese interest in American cars. I lived there for roughly a decade and still spend a couple of weeks a year there. American cars are especially unsuited to Japanese driving conditions; because of size, (poor) gas mileage, and left-hand-drive. Thus, American cars tend to be niche vehicles – Corvettes and Jeeps. The comparison of U.S. make sales to Mercedes and BMW is a false one. European conditions are much more similar to Japanese conditions than are U.S. conditions. Further the European companies all offer RHD. Finally, decades of American whining about Japanese ‘unfair ‘ competition have left their mark. Most Japanese view American cars as junk, and for a long long time it was hard to prove them wrong.

  • avatar
    ToddAtlasF1

    It seems like the horses are long gone, so the barn door isn’t much of an issue. Ford is killing everything small in the US. GM is Chinese. Fiat is Italian. Various transplants might have opportunities for exports, but I don’t see Japan having a growing car market in the future.

  • avatar
    slavuta

    The Renegade, on the pic, is built in Italy. Are they bring them here and then ship to Japan?


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