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Trump and Abe Meet as Japan and U.S. Try to Reach Trade Deal U.S. and Japan Push for a Trade Deal Following Failed Pacific Partnership
(about 13 hours later)
WASHINGTON — President Trump and Prime Minister Shinzo Abe of Japan will meet in Washington on Friday as the two countries work toward a bilateral trade deal that could give American farmers more access to Japan’s market and forestall tariffs on Japanese cars. WASHINGTON — President Trump said on Friday that trade talks between the United States and Japan were “moving along very nicely” and suggested a deal might be reached by late May as he met with Shinzo Abe, the Japanese prime minister, at the White House.
The potential for such a trade deal was almost unthinkable two years ago, when Mr. Trump pulled the United States from the Trans-Pacific Partnership, a 12-nation pact that Mr. Abe had negotiated with President Barack Obama. Japan, which formalized the now 11-country trade agreement last year, initially refused to strike a bilateral deal, insisting that the United States should instead return to the pact. Mr. Trump and Mr. Abe have begun discussing a bilateral trade deal that could give American farmers more access to Japan’s market and forestall tariffs on Japanese cars.
But Mr. Trump’s aggressive approach to trade, along with Japan’s concerns about North Korea and China, has helped bring Mr. Abe back to the negotiating table. The president has already placed tariffs on Japanese steel and aluminum and has threatened to impose hefty tariffs on the approximately 1.7 million cars that Japan sends annually to the United States. A deal is not certain, but the potential for a bilateral agreement was almost unthinkable two years ago, when Mr. Trump pulled the United States from the Trans-Pacific Partnership, a 12-nation pact that Mr. Abe had negotiated with President Barack Obama. Japan, which formalized the trade agreement last year, initially refused to strike a separate deal with the United States, insisting that it should instead return to the pact.
Mr. Abe, who has emphasized his personal rapport with the American president and wants to avoid a protracted dispute, now appears willing to deliver Mr. Trump a political victory on trade, if the United States can make some compromises. But Mr. Trump’s aggressive approach to trade, along with security concerns about North Korea and China, has brought Japan back to the negotiating table. The president has already placed tariffs on Japanese steel and aluminum and has threatened to impose hefty tariffs on the approximately 1.7 million cars that Japan sends annually to the United States.
Mr. Trump has not yet indicated whether he will lift his metal tariffs on Japan or allow it to avoid the auto tariffs he has repeatedly threatened to impose on a host of trading partners. On Thursday, Mr. Trump said Mr. Abe would be coming to the White House “for a very important meeting.” That domineering treatment has not deterred Mr. Abe, who has emphasized his personal rapport with the American president and wants to avoid a protracted dispute. Mr. Abe appears willing to deliver Mr. Trump a political victory on trade, if the United States can make some compromises.
Mr. Trump’s top trade negotiator, Robert E. Lighthizer, met on Thursday with Toshimitsu Motegi, the Japanese economy minister, to try to hammer out the scope of the trade talks. Treasury Secretary Steven Mnuchin met separately with Japan’s finance minister, Taro Aso, for discussions on currency. In an initial round of trade talks this month, Mr. Lighthizer and Mr. Motegi discussed agriculture, digital trade, and the United States trade deficit with Japan, among other issues. In a meeting with Mr. Abe at the White House on Friday, Mr. Trump highlighted his primary goal, which is gaining more access to Japan’s market for American farmers.
In a briefing Thursday, a senior administration official said that Mr. Trump, Mr. Abe and their national security and economic advisers would host a series of bilateral meetings on Friday covering topics including the effort to denuclearize the Korean Peninsula, a cooperation on energy in the Indo-Pacific region, and enhancing their trade and investment ties. “We’ll be discussing very strongly agriculture because as the P.M. knows Japan puts very massively tariffs on our agriculture,” Mr. Trump said.
On trade, the two sides may be working toward a limited deal on a range of topics that would give American farmers and ranchers better access to the Japanese market, and Mr. Trump a political victory before the 2020 presidential election. The countries could then swing back later for a more comprehensive trade agreement covering manufacturing and services. The two sides are also discussing economic and security concerns, and advisers from the two countries wrapped up a series of meetings on Friday on efforts to denuclearize the Korean Peninsula. On Friday evening, the leaders and their wives were scheduled to celebrate the birthday of Melania Trump, the first lady, over dinner, and on Saturday to play a short round of golf.
But several questions remain — particularly what Japan would receive in return for agreeing to such favorable trade terms for the United States. If Japan demands that the United States reciprocate by lowering existing tariffs on products like light trucks, that could require a more lengthy congressional approval that the Trump administration is eager to avoid. Few world leaders have put more time and effort into cultivating ties with Mr. Trump than Mr. Abe, and few have gotten less of a payoff. Mr. Abe may now have to stump for a less-popular bilateral trade deal with the United States, after pouring his political capital into the Trans-Pacific Partnership.
Japan is likely to request an exemption from tariffs that Mr. Trump has threatened to put on foreign cars and car parts. The president has a deadline of May 18 to decide whether to place levies on foreign cars — a move he says would help bolster the American auto industry. But Mr. Trump could delay the tariffs for countries with which the United States is negotiating — or agree to a carveout from any tariffs if Japan gives Washington a big enough victory. Mr. Trump plunged into a risky nuclear negotiation with North Korea’s Kim Jong-un, despite Mr. Abe’s warnings to hold a tough line with Pyongyang. Officials in Tokyo worry that a nuclear deal could hurt Japan, if Mr. Kim agrees to give up his intercontinental ballistic missiles, which can reach the United States, without surrendering his intermediate and short-range missiles, which can hit Japan.
Avoiding those tariffs is critical for Japan, which supplies about one-fifth of American vehicle imports by value, the country’s second-largest source of imports after Mexico. In that regard, the impasse between Mr. Trump and Mr. Kim in Hanoi in February was positive news. Japanese officials were encouraged that Mr. Trump rejected Mr. Kim’s demand to lift onerous sanctions against North Korea in return for it shutting down an aging nuclear facility at Yongbyon. As long as Mr. Trump refuses such demands, analysts said, he and Mr. Abe will be on the same page.
A 25 percent tariff on imported automobiles would raise the average price of a compact car by $1,408 to $2,057, according to estimates by Mary E. Lovely and other economists at the Peterson Institute for International Economics. Such a price jump are likely to depress sales of foreign-made cars and encourage Japanese automakers to move more production to the United States. What could be more challenging for Mr. Abe, in the short run, is persuading Mr. Trump to remain a visible presence at international gatherings, like the Group of 20 summit meeting, scheduled for the Japanese city of Osaka in June, as well as the Group of 7 meeting set for France in August and the East Asia Summit in Thailand. Japan, which assumed the G-20 presidency for the first time this year, views the gatherings as a crucial way to exercise diplomatic leverage.
Mr. Trump will visit Tokyo to meet the new emperor, Naruhito, in May, only a month before the Osaka summit meeting. He famously clashed with other Western leaders at his last Group of 7 meeting in Canada. And he sent Vice President Mike Pence in his stead to last year’s East Asia Summit in Singapore.
“The Japanese would be lucky to get Trump to one of the three,” said Michael J. Green, who holds the Japan chair at the Center for Strategic and International Studies. “They really need him to support the international institutions that underpin Japan’s own diplomatic position.”
On trade, the two sides appear to be heading toward a limited deal that would give American farmers and ranchers better access to the Japanese market, and Mr. Trump a political victory before the 2020 presidential election. The countries could then swing back later for a more comprehensive trade agreement covering manufacturing and services.
Mr. Trump indicated on Friday that a deal could be in the final stages by the time he heads to Japan.
“I think it can go fairly quickly. Maybe by the time I’m over there, maybe we sign it over there. But it’s moving along very nicely, we’ll see what happens,” the president said.
But several questions remain — particularly what Japan would receive in return for agreeing to such favorable trade terms for American farmers. If Japan demands that the United States reciprocate by lowering existing tariffs on products like light trucks, that could require a more lengthy congressional approval that the Trump administration is eager to avoid.
Mr. Trump wants Japan to reduce its exports and manufacture more cars at factories built in the United States to reduce a large bilateral trade deficit. Mr. Trump has not yet indicated whether he will lift his metal tariffs on Japan or allow it to avoid the auto tariffs he has repeatedly threatened to impose on a host of trading partners. Japan is likely to request an exemption from both.
The president has a deadline of May 18 to decide whether to place levies on foreign cars — a move he says would help bolster the American auto industry. But Mr. Trump could delay the tariffs for countries with which the United States is negotiating — or agree to a carveout from any tariffs if Japan gives Washington a big victory.
Avoiding those tariffs is critical for Japan, which supplies about one-fifth of American vehicle imports by value.
“If I’m Abe, this trade thing is kind of a pain in the neck to me,” said Clyde Prestowitz, a former Reagan administration official, adding that Japan was more concerned with security issues in China and North Korea. “What I need to do is get Trump off my back.”“If I’m Abe, this trade thing is kind of a pain in the neck to me,” said Clyde Prestowitz, a former Reagan administration official, adding that Japan was more concerned with security issues in China and North Korea. “What I need to do is get Trump off my back.”
Mr. Trump’s primary demands for Japan are likely to center on access to Japan’s agricultural markets for farmers that have been hit hard by his trade battles with China, Canada, Mexico and Europe. Mr. Trump wants Japan to reduce its exports and manufacture more cars at factories built in the United States, to reduce a large bilateral trade deficit. Mr. Trump’s primary demands for Japan are likely to center on access to agricultural markets for farmers and ranchers that have been hit hard by his trade battles with China, Canada, Mexico and Europe. That group — an important constituency for the president’s re-election — say Washington’s withdrawal from the Trans-Pacific Partnership has put them at a disadvantage.
But the president is also facing pressure from an important constituency — American farmers and ranchers — who say Washington’s withdrawal from the Trans-Pacific Partnership has put them at a disadvantage in the Japanese market. Competitors in Canada, New Zealand and Australia, which are part of the partnership, enjoy lower tariffs when selling into Japan, as does Europe, which has its own Japanese trade pact. Beef from Australia, New Zealand, Canada and Mexico, which are all part of the partnership, is now charged a 26.6 percent tariff in Japan, compared with a rate of 38.5 percent for American products, and data shows that American goods are already losing market share. That disadvantage will grow as further tariff cuts from the Pacific deal are phased in, said Kent Bacus, senior director of international trade at the National Cattlemen’s Beef Association.
Beef from Australia, New Zealand, Canada and Mexico is now charged a 26.6 percent tariff in Japan, compared with a rate of 38.5 percent for American products, and data show that American goods are already losing market share. That is a disadvantage that will continue to grow as further tariff cuts from the Pacific deal are phased in, said Kent Bacus, senior director of international trade at the National Cattlemen’s Beef Association.
“The Japanese market is critical for the U.S. cattle and beef industry,” Mr. Bacus said. “We urge the Trump administration to continue taking all necessary steps to secure a trade agreement with Japan as quickly as possible.”“The Japanese market is critical for the U.S. cattle and beef industry,” Mr. Bacus said. “We urge the Trump administration to continue taking all necessary steps to secure a trade agreement with Japan as quickly as possible.”
Mr. Abe spent considerable political capital to get Japanese farmers to agree to concessions in the multilateral trade pact. When he agreed to engage in bilateral talks with the United States, he wrangled an agreement from American officials that Japan would not have to go any further than the commitments it made in the TPP to open up its markets for agricultural and forestry imports from the United States, most notably beef and dairy products.
While American farmers worry that they are losing ground, it is too early for countries like Australia, New Zealand or Canada to see much benefit from the enforcement of the multilateral agreement.
Many of the concessions will be phased in over a period of several years and farmers need to ramp up production and work out transportation and other logistical issues before they can truly take advantage of the improved access to Japan, said Jeffrey Wilson, a research fellow at the Perth USAsia Center at the University of Western Australia. “Certainly for Australian trade negotiators in Tokyo, no one is going to be able to point and say, ‘Look at what you’re missing out on’ yet,” Mr. Wilson said.
But he said that trade negotiators from countries that signed on to the TPP were likely to be deeply concerned if the United States were given access to Japan without having to make concessions or join the multilateral deal. “It’s terrible for countries like Australia, Canada, New Zealand and Vietnam and Malaysia that had to do serious reforms to get into the deal if they let the U.S. backdoor in,” Mr. Wilson said.
Any signatories to the TPP will also be looking to see if the American negotiators gain better terms through any bilateral agreement.
Given how much Japanese automakers fear looming tariffs, a deal where Japan opens its market to American beef and the United States agrees not to impose auto tariffs “would be a perfect solution for Japan,” said Shujiro Urata, a professor of economics at Waseda University in Tokyo. “The balance — or imbalance — of power between Japan and the U.S. means that Japan cannot ask so much from the U.S. at the moment.”Given how much Japanese automakers fear looming tariffs, a deal where Japan opens its market to American beef and the United States agrees not to impose auto tariffs “would be a perfect solution for Japan,” said Shujiro Urata, a professor of economics at Waseda University in Tokyo. “The balance — or imbalance — of power between Japan and the U.S. means that Japan cannot ask so much from the U.S. at the moment.”
He added that automakers were likely to be willing to increase investments in factories in the United States so that more cars would be built domestically rather than shipped in from Japan. He added that automakers would probably be willing to increase investments in factories in the United States so that more cars would be built domestically rather than shipped from Japan.
Still, Japan could ask for some concessions, like a reduction in the current tariffs of 20 percent that the United States imposes on light truck imports.Still, Japan could ask for some concessions, like a reduction in the current tariffs of 20 percent that the United States imposes on light truck imports.
“We are not just going to give in on all the agricultural production and get nothing” in return, said Ichiro Fujisaki, a former Japanese ambassador to Washington.“We are not just going to give in on all the agricultural production and get nothing” in return, said Ichiro Fujisaki, a former Japanese ambassador to Washington.
Any signatories to the T.P.P. will also be looking to see if the American negotiators gain better terms through any bilateral agreement.
Jeffrey Wilson, a research fellow at the Perth USAsia Center at the University of Western Australia, said the T.P.P. countries were likely to be deeply concerned if the United States were given access to Japan without having to make concessions or join the multilateral deal.
“It’s terrible for countries like Australia, Canada, New Zealand and Vietnam and Malaysia that had to do serious reforms to get into the deal if they let the U.S. backdoor in,” Mr. Wilson said.