US and Japan considering new trade deal

US and Japan considering new trade deal

22/07/19

Chern Han Mah, Business and Policy Intern

According to several industry sources, US and Japanese officials are working hard to reach a small bilateral trade agreement involving agriculture and autos before US President Donald Trump and Japanese Prime Minister Shinzo Abe meet in New York in September. The deal could involve Japan giving US beef and pork farmers greater access to its market, while the US would reduce tariffs on certain Japanese auto parts.

The deal would be a win for both sides: Japanese auto constitutes about nearly two-thirds of Japan’s trade surplus with the US – something Trump has repeatedly complained about. At the same time, increased access to the Japanese market could help Trump shore up support among farmers as he attempts to win a second term next year.

According to the South China Morning Post, Japanese government officials find the idea of a trade deal involving just agriculture and autos “interesting and reasonable” but insist that talks need to cover all items. Against this backdrop, Trump has threatened to impose 25 per cent tariffs on imported Japanese cars on national security grounds but has delayed those as trade talks continue.

Meanwhile, David Stilwell, the new Assistant Secretary of State for East Asian and Pacific Affairs, has pledged to help Japan and South Korea resolve the ongoing dispute between them, though no concrete steps were specified. This nonetheless represents a change in US position with the US previously unwilling to publicly wade into the feud between its allies.

The comments came after Japan threatened to broaden trade restrictions against South Korea including striking the country off a list of countries that enjoy preferential treatment for trade. Chipmakers in South Korea, who have been heavily impacted by the current restrictions, have also begun testing locally-sourced alternative raw materials. This indicates that the current dispute is unlikely to be resolved soon, with both sides digging in for what could be a highly damaging global trade row.

The ongoing disruption to global trade will be one of the themes discussed at the Asia House Global Trade Dialogue, taking place in Singapore on 7 November 2019. 

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