Japan Avoids U.S. Auto Tariffs for Now

Japanese Prime Minister Shinzo Abe and President Donald Trump agreed to begin trade negotiations last week. Warrington Shaw analysts said the agreement between the leaders temporarily protects Japan’s auto industry from additional export duties which are a significant problem for an economy, which is heavily reliant on exports.

The U.S. and Japan released a joint statement announcing that their discussions will focus on trade in Japan’s auto and farming industries. The statement revealed that an agreement regulating the auto industry would be drafted with the intent of bolstering production and employment in the U.S., according to Warrington Shaw analysts.

Trump has emphasized his ongoing dissatisfaction with Japan’s substantial trade surplus with the U.S., according to Warrington Shaw. Nearly 66 percent of the $69 billion trade surplus is rooted in Japan’s auto exports, and Trump is insisting that a bilateral agreement be put in place to address the issue.

Japan was initially against the notion of the straight bilateral free trade agreement that Trump was seeking. Both sides have shown a willingness to compromise and have settled on a deal that allows Japan to avoid a 25-percent tariff on auto exports and Trump is happy to have convinced Japan to discuss a two-way trade agreement, Warrington Shaw.

Trump has said that the future looks bright for the United States’ trading relationship with Japan.

Japan had been concerned that Trump could insist on a decrease in the number of vehicles imported from Japan or that he could decide to impose harsh import tariffs, citing national security concerns.

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