Japan dodges US auto tariffs, for now, as Trump and Abe agree on trade talks
NEW YORK (Reuters) - US President Donald Trump and Japanese Prime Minister Shinzo Abe agreed to start trade talks in an arrangement that, for now, protects Japanese automakers from further tariffs, seen as a major threat to the export-dependent economy.
The two countries said in a joint statement the talks “will respect positions of the other government”, drawing lines on autos and Japan’s agriculture sector.
Trump has made clear he is unhappy with Japan’s $69 billion trade surplus with the United States - nearly two-thirds of it from auto exports - and wants a two-way agreement to address it.
Tokyo pushed back on a straight bilateral Free Trade Agreement (FTA) that Washington had sought. The latest framework appeared designed to allow both parties to save face: Abe avoids the worst-case scenario of an imminent 25 percent tariff on cars, while Trump claims victory for getting Japan to a two-way negotiating table.
“This was something that, for various reasons over the years, Japan was unwilling to do and now they are willing to do,” Trump said at a summit with Abe in New York on the sidelines of the UN General Assembly.
“We’re going to have a really great relationship, better than ever before on trade,” he said.
Wednesday’s statement said a deal governing the auto sector would be written to boost production and jobs in the United States.
Tokyo had worried that Trump could demand a reduction in auto imports from Japan or that he could impose steep tariffs on such imports on national security grounds.
While economists saw the agreement as a positive outcome for Japan for now, they noted what would ultimately be agreed upon was still unknown.
“If you just look at what was agreed this time, Japan did extremely well,” said Junichi Sugawara, senior research officer at Mizuho Research Institute.
“But at the end of the day, this is just the entry-way into any final agreement and we have to remember that there is a possibility that (Japan) could be hurt very badly in the end,” he said.
Shares of Subaru Corp and Mazda Motor Corp , two of the most export-reliant Japanese automakers, rose 3 percent and 1.2 percent respectively, outperforming a slightly weaker Tokyo market.