Trump Issues Executive Order to Implement Tariff Deal

The President of the United States, Donald Trump, signed on an executive order September 4th which implemented tariff agreement with Japan. Although the U.S. and Japan reached an agreement on July 22nd, Trump has not determined when it would be activated. The executive order made clear that the agreement was viable and applied to Japanese products dating back to August 7th. Japanese Prime Minister Shigeru Ishiba put a period on the difficult negotiation with the U.S. 

The bilateral agreement was a package of raising tariff rate on Japanese products to the U.S., opening Japanese market and investment from Japan to the U.S. Tariff on Japanese cars would be 15 percent, reducing from 25 percent. “Reciprocal tariff” will equally be imposed on all goods, but will not be applied to some which already with 15 percent tariff or more

 

Japan will increase import of U.S. rice by 75 percent and buy U.S. corn, soy bean, ethanol, air craft or defense equipment as worth as annual 8 billion dollar. Japan also invests in America with 550 billion dollar. Japan explained that the investments would be made by private companies in Japan and government-backed financial institutions would endorse it. It has been a deal which would be more preferrable for the U.S. than for Japan.

 

Trump insisted after the bilateral agreement that the U.S. would obtain 90 percent of profit from Japan’s investments included in the deal, appealing advantage of the U.S. against Japan. And Trump administration explained that 15 percent of tariff would be imposed on Japanese products, when it announced new reciprocal tariffs for all the countries in August 7th. Japan requested document of agreement to secure implementation of the U.S.

 

Japan’s top negotiator on tariff, Ryosei Akazawa, and U.S. Secretary of Commerce, Howard Lutnick, exchanged a memorandum of understanding which detailed the agreement. Both countries reconfirmed that the investments would focus on strategically important areas, such as critical minerals, semiconductors and pharmaceuticals. The U.S. President would establish a committee headed by Lutnick to oversee Japan’s investments.

 

There is an argument in Japan that the deal still is unilaterally beneficial for the U.S. and burden on Japanese economy is too heavy. The 15 percent of tariff on Japanese cars and other goods demands Japanese manufacturers further effort to cut cost in process of production. There has already been a prediction in Japanese companies that their financial balance this year will be worsened by Trump tariffs.

 

Prime Minister Ishiba has been ambitious to maintain his administration, despite bitter defeat in the Upper House election in July, to conclude tariff negotiation with the U.S. Issuance of the executive order and the memorandum of understanding may give anti-Ishiba powers in the Liberal Democratic Party a cause to argue that Ishiba has concluded an important issue, so that Ishiba has no reason to stay.

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