U.S.-Japan tariff negotiator embarks on second round of discussions

U.S.-Japan tariff negotiator embarks on second round of discussions

Informal Take:

All eyes are on Tokyo as their top trade rep, Ryosei Akazawa, jets off to Washington for a fresh round of talks with U.S. officials. As tensions surrounding Donald Trump's trade levies continue to mount, Akazawa is prepared to negotiate some key concessions to ease the strain.

Rumor has it he might tweak vehicle import procedures, ramp up U.S. corn and soybean purchases, or delve into developing LNG fields in Alaska. Japan, a major U.S. buddy and investor, faces a 10% base tariff, with additional steep levies on cars, steel, and aluminum. Trump threatened 24% tariffs, but held off for now - except for China.

Akazawa plans to chat with U.S. Treasury Secretary Stephen Mnuchin on Thursday, after their initial mid-April meet. Even though Japan stands firm on scrapping all tariffs, the stakes are high. Every day, Japanese businesses watch their cash evaporate due to U.S. tariffs. An auto rep shared that a mil lost each hour! Aiming for progress, Akazawa targets a win-win deal.

Trump's gripe? Japan's vehicle safety testing rules irk him. Some say simplified screening processes could be on the table for Tokyo, though U.S. rice imports might cause a political stir. After all, Japanese farmers back the ruling party.

Interesting twist: Trump has longed for a stronger yen to boost U.S. exports. Akazawa's first talks mummed on the yen, but economist Norihiro Yamaguchi notes that sudden big surprises in currency markets can backfire. The yen's climb since Trump's tariffs could just be a reflection of the market, not a direct response to negotiations.

Enrichment Data:

Low Tariffs, Big Deficit: Trump's tariffs are based on a goods trade deficit formula, resulting in high rates with little economic rationale. Japan could use wider concessions, such as in terms of currency policy or defense burden-sharing, to renegotiate these tariffs[1].

Historical Context: In previous negotiations, Japan has shown reluctance to make significant concessions, especially in agricultural sectors despite potential TPP implications. The auto sector and others like pharmaceuticals and financial services were left for future discussions[2].

Contentious Issues: Criticisms from the Trump administration indicate a focus on key sectors like automobiles and agriculture. However, Japan's ability to secure relief depends on regional trade dynamics and broader geopolitical considerations[3].

1. Akazawa, Japan's top trade rep, is set to discuss tariff reduction with U.S. Treasury Secretary Stephen Mnuchin, aiming to ease the strain caused by the tariffs.
2. As Akazawa heads to Washington, he might propose alterations in vehicle import procedures, a potential concession to address U.S. tariffs on cars.
3. In addition to vehicle procedures, Akazawa could also consider ramping up U.S. corn and soybean purchases, or delve into developing LNG fields in Alaska, as part of the trade discussions.
4. Despite facing a 10% base tariff and additional levies on cars, steel, and aluminum, Japan could opt to renegotiate these tariffs by offering wider concessions, such as in terms of currency policy or defense burden-sharing.
5. Economist Norihiro Yamaguchi highlights that sudden big changes in currency markets can backfire, suggesting that the yen's climb since Trump's tariffs might not be a direct response to negotiations.
6. According to historical context, Japan has shown reluctance to make significant concessions, especially in agricultural sectors, despite potential TPP implications.
7. The stakes are high for Japanese businesses, with every day seeing cash evaporate due to U.S. tariffs. An auto rep shared that a million dollars is lost each hour due to these tariffs.

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