Trade wars: Is Trump lining up Japan next?

While the US takes aim at China, Canada and Mexico over perceived trade imbalances, Japan has kept a low profile, hoping Prime Minister Shinzo Abe's friendship with Donald Trump will keep Tokyo out of the firing line.

But as Abe and Trump prepare to hold talks that will touch on trade frictions, there are signs Japan could be next in the US president's sights, with the country's greatest fear being higher tariffs on cars, following Trump’s frequent grumbles about a “very high deficit” with Japan, the world’s third-biggest economy.

Vehicle and parts exports from the auto sector account for 80 percent of the trade imbalance and it is the sight of “millions of Japanese cars” on American roads that raises Trump's hackles, while few US brands are driven in Japan.

However, some critics argue that Japan imposes a raft of non-tariff barriers, including what they say are overly-rigorous safety standards that make importing difficult.

Initial negotiations between US Trade Representative Robert Lighthizer and Japanese counterpart Toshimitsu Motegi have already taken place without a breakthrough and a second round is expected later on Monday.

The two sides have opposing points of view: Tokyo wants to settle trade disputes in a forum like the Trans-Pacific Partnership, a multi-nation trade pact, whereas Washington wants a bilateral deal.

According to US trade analysts, it is probable that Trump will move his focus to Japan once he reaches some settlement or deal regarding US trade tensions with China and NAFTA talks.

The Trump administration's most effective weapon in talks with Japan remains the threat to impose tariffs of up to 25 percent on automobile imports which could cut Japan's GDP by as much as 0.5 percent.

Manufacturers have already warned they will be unable to absorb the cost and it will be passed onto US consumers — in Toyota's case, this could cost a buyer as much as $6,000 per car.

Trump will probably demand more Japanese cars made in the US, but the room for maneuver is limited.

A China-style tit-for-tat tariff battle is also unlikely, as Abe has already said such a move would benefit nobody.

Instead, Japan is likely to petition the World Trade Organization, as it threatened to do when the US imposed steel tariffs.

If Japan offers a “satisfactory package of concessions on market access in the near term, particularly one that included agricultural concessions”, it might escape Trump's wrath, said a trade official.

But this is a very sensitive subject in Japan which already has tariffs in place to protect its farmers.


Posted on: 2018-09-24T12:26:00+05:00