Japan and U.S. Strike a Deal on Tariff

Japan and the United States reached a deal on tariffs. The both governments agreed on reducing tariff on Japanese products to the U.S. from announced 25 percent to 15 percent. Tariff on Japanese cars will be reduced from 27.5 percent to 15 percent. U.S. President trump recognizes that Japan would make $550 billion of investment to the U.S. and it would receive 90 percent of its profit. The government of Japan will take measures to support Japanese companies affected by the deal.

Trump sent a letter to Japanese Prime Minister Shigeru Ishiba on July 7th which unilaterally noticed that the U.S. would impose 25% of “reciprocal tariff” on Japanese products starting August 1st. Trump agreed on cutting off the rate to 15 percent.

 

On cars, the U.S. already imposed additional 25 percent of tariff on all imported cars including from Japan since April 3rd, making tariff on Japanese cars 27.5 percent in addition to 2.5 percent of basic tariff. After the deal with Japan, it would decline from 27.5 percent to 15 percent. Tariffs on steel and aluminum will be maintained on 50 percent as it has been since June.

 

“Japan will open their Country to Trade including Cars and Trucks, Rice and certain other Agricultural Products,” notedTrump in the social network. He posted it after a meeting with Japan’s top negotiator, Ryosei Akazawa, Minister on Economic Revitalization of Ishiba Cabinet, at the White House on July 22nd. Akazawa visited Trump after a meeting with U.S. Secretary of Treasury, Scott Bessent, in his eighth visit to Washington, D.C. since the bilateral negotiation started in April.

 

Ishiba announced that both governments struck a deal on tariffs. “It will be the lowest rate among the countries with the black in trade balance against the U.S. It is an extremely important agreement,” said Ishiba to the reporters. Japan is going to expand quota for minimum access of rice for the U.S. with expense of other countries’ quota. “This deal does not include any sacrifice of agriculture,” stressed Ishiba.

 

Trump’s announcement on Japan’s investment amounting $550 billion is still not clear about which business it included. Akazawa explained that the businesses include semiconductor, pharmacy, steel, shipbuilding, important minerals, aircraft, energy, cars, artificial intelligence and quantum. It will include purchase of 100 Boeing aircraft. Trump also revealed that Japan would buy billions of dollars of U.S. military equipment. Japan is going to loosen safety standard on U.S. cars, which has been regarded as one of Japan’s non-tariff barriers.

 

It is undeniable that covering 15 percent of additional tariff is not an easy task for Japanese manufacturers. They are supposed to be forced to reduce cost in production. There is an estimation that the tariff will reduce Japan’s GDP by 0.55 percent within a year. Ishiba administration is going to deliver supportive measures for Japanese economy, asking cooperation to the opposition parties.

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