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President Donald Trump and Japanese Prime Minister Shinzo Abe shake hands after a news conference in the Rose Garden at the White House on June 7, 2018. Mark Wilson/Getty Images
President Donald Trump and Japanese Prime Minister Shinzo Abe shake hands after a news conference in the Rose Garden at the White House on June 7, 2018.

Trump courts Japan

President Trump talks up quick deal with Japan; Japanese leaders in no rush.

by Yuko Takeo and Jenny Leonard

With his trade war with China heating up, Donald Trump is suddenly talking up a quick deal with Japan to help out ailing American farmers. Yet leaders in Tokyo are in no rush to assist a U.S. president who has repeatedly threatened them with higher tariffs.

Trump is expected to mention his desire for an early harvest trade deal in Tokyo next week, when he will be the first foreign leader to meet Japan’s new emperor. Ahead of that, he’s expected to sign an order giving Japan and the EU 180 days to “limit or restrict” sales of automobiles and their parts into the U.S. in return for delaying new auto tariffs, Bloomberg reported Thursday.

A deal with Japan has become more urgent after Trump further escalated the trade war with China, which has pledged to hit back with higher duties on American farm goods. China’s state media this week signaled a lack of interest in resuming trade talks with the U.S.

“While President Trump seems to be ok in slow walking the China trade negotiations at least for now, he’s impatient with Japan,” said Wendy Cutler, a former U.S. trade negotiator who is now the managing director of the Asia Society Policy Institute in Washington. “He wants agriculture market access from Japan now, responding to the urgent requests of U.S. farmers.”

Political stakes

The development marks a shift from when Trump took office in 2017 and pulled out of the Trans-Pacific Partnership, which was a 12-country trade agreement backed by Japan. Prime Minister Shinzo Abe had repeatedly urged Trump to join the agreement, which cost the Japanese leader political capital among farmers who opposed any opening.

Those same calculations are at play as Trump looks to pry open Japan’s notoriously closed agricultural market. But instead of signaling a desire to boost ties with a longstanding U.S. ally and rejoin the TPP, a move the Obama administration argued would help counter China, Trump is looking ahead to his own re-election campaign in 2020.

Abe also doesn’t see political upside in giving in. Japan is holding upper-house elections in July and before that it’s politically sensitive -- and maybe impossible -- for Abe to concede anything, much less on agriculture.

“Japan’s on the defense in this battle,” said Junichi Sugawara, a senior research officer at Mizuho Research Institute. “It’s a matter of how much they’ll be able to avoid the U.S.’s demands.”

Trump hammered home his intention for a quicker conclusion last month after his summit with Abe, saying a deal could be signed by the time he visits Japan in May. But Japan’s chief trade negotiator Toshimitsu Motegi damped speculation of a speedy deal, noting that it would need congressional approval in the U.S. He has also repeatedly said that any trade deal will be a package agreement, signaling that Japan won’t agree to a quick, piecemeal series of agreements broken into parts.

U.S. Trade Representative Robert Lighthizer and Motegi so far have only agreed on the broad scope of a deal. The Trump administration is seeking to leverage its threat of auto tariffs to gain agriculture market access for American products, but it’s not clear what the U.S. would be willing to give.

According to people familiar with Japan’s thinking, Tokyo wants the U.S. to lower tariffs on auto parts and other industrial goods. Cutler said the amount of tariff lines on auto parts makes it possible the two sides can find certain components where the U.S. could consider phasing out tariffs over a period of time.

Personal ties

But industry representatives doubt Trump would agree to that, noting that the auto-workers union has supported his hard line on tariffs. And while Trump is likely to extend a May 18 deadline to slap tariffs on imported cars and parts, his escalation with China shows he’s willing to play hardball if talks don’t go his way.

Even a tariff hike of 10% could be costly for Japan, depressing gross domestic product growth by more than 0.2%, according to Goldman Sachs analysts.

Abe has sought to avoid this scenario through building one-on-one ties with Trump. He was one of the first world leaders to embrace Trump after the 2016 presidential election, and Trump said Abe had nominated him for the Nobel Peace Prize -- something the Japanese leader declined to confirm.

But so far, those efforts haven’t yielded much. Trump has called for tariffs on Japan ever since he was a real-estate developer in the 1980s, and still has steel and aluminum tariffs on the country. Besides the trade fight, the Trump administration is said to be preparing to seek more money from Japan for hosting U.S. troops.

Like China, Japan’s push for a balanced agreement with the U.S. stems from painful historical memories of being exploited by foreigners, according to Cutler.

“Japan’s politics won’t allow it to agree to a one-sided deal that just focuses on Japan providing agriculture market access to the United States,” she said. “They will need concessions in return.”

--With assistance from Emi Urabe.

To contact the reporters on this story:

Yuko Takeo in Tokyo at ytakeo2@bloomberg.net;

Jenny Leonard in Washington at jleonard67@bloomberg.net

To contact the editors responsible for this story:

Brett Miller at bmiller30@bloomberg.net

Daniel Ten Kate

© 2019 Bloomberg L.P.

TAGS: Farm Policy
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