No New Auto Tariffs For Japan, Probably

The United States and Japan have signed a limited trade deal that’s been simmering for some months now. President Donald Trump has been eager to secure a place where American farmers can send their goods now that the trade war with China has diminished American dealings with that market. In return, Japan wanted assurances from the U.S. that it will not impose any new automotive tariffs, as cars remain one of its chief exports.

While the island nation didn’t get the guarantee in writing, Prime Minister Shinzo Abe claims he received a verbal promise. This is to be the first part of a broader trade deal between the two countries.

Under the preliminary deal, Japan will reduce tariffs on roughly $7.2 billion of American farming goods, including items like corn, wine, pork, and beef. Some items, like dairy products, do not receive protections, however.

While important for American farmers, especially after the United States’ abandonment of the Trans-Pacific Partnership, the deal is really a preamble for follow-up deals more concerned with industrial goods. In fact, Trump brought up the automotive sector more than once when announcing the accord at the White House on Monday.

“I said to Prime Minister Abe, ‘Please, we need auto plants.’ And I said that right at the beginning when I first met with him, and immediately liked him a lot. And they’ve really produced. They’re doing a lot of plants, not just auto. Many, many — many, many plants and factories are being built in the United States by Japan and Japanese companies,” the president said. “These agreements will ensure that our economic partnership flourishes brighter than ever before. I think we’re probably at a stage with Japan where I don’t think our relationship has ever been stronger or better than it is right now.”

For now, Trump says the two countries continue to work on a more comprehensive agreement while the existing 2.5-percent tariff on Japanese auto exports remain in place. The limited trade pact also includes market-opening commitments on $40 billion worth of digital commerce between the two countries.

The deal was signed by U.S. Trade Representative Robert Lighthizer and Japanese Ambassador to the U.S. Shinsuke Sugiyama in the White House and appears to have been unchanged from the details agreed upon by Trump and Abe in September. Expect subsequent deals to be announced soon, likely dealing with cars and automotive parts directly.

“It certainly is the Japanese ambition to have car tariffs be discussed,” Lighthizer said. “But at this point, it’s not part of this agreement.”

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