First Series of Projects on Tariff Deal

Government of Japan and the United States announced their projects of investment which Japan promised last summer when they reached a deal on tariff rate. They included manufacturing artificial diamonds in Georgia, building a port for exporting crude oil in Texas and gas power generation in Ohio. The volume of investment for those projects amounts to $36 billion. The leaders of both governments welcomed the deal as a symbol of economic cooperation between two countries. 

Last July, both governments reached a deal on tariffs imposed by Donald Trump administration on products from Japan. The U.S. accepted reduction of rate of tariffs on Japanese products from 25 percent to 15. Tariff on Japanese cars were halved to 12.5 percent. In return, Japan offered $550 billion of investment to the U.S. by the end of Trump’s term as the president.

 

Artificial diamond is necessary for production of semiconductors. Although Japan and the U.S. has been dependent on Chinese artificial diamonds, the new factory is estimated to cover around 75 percent of demands in both countries. A subsidiary of the world top diamond trader, De Beers, is going to build a factory in Georgia and Japan will purchase its product. About $600 million will be invested to the project.

 

Building a port in Taxas is a part of project for exporting crude oil from Texas. The oil will be transported from midland to the coast and loaded on vessels. The amount of crude oil is expected to be 20 to 30 billion dollar every year. Mitsui O.S.K. Lines and Japan Steel are interested in providing ships and pipelines. As Trump administration turns its back to reducing production of fossil fuel, which emits greenhouse gasses, the project is supporting Trump administration’s agenda.

 

One of the major communication firms in Japan, Softbank Group, promotes building of gas power plant for providing electricity to data center for operation of artificial intelligence in Ohio. Toshiba and Hitachi are going to offer related equipment for power generation. The plant will supply 9.2 gigawatt of electricity, which will be the greatest gas power plant in the U.S. 

 

Both governments will launch special-purpose vehicle to support those projects. Japan Bank for International Cooperation (JBIC) contributes funds to the projects and other private banks will also offer funds based on guarantee from Nippon Export and Investment Insurance (NEXI). The U.S. side offers land property or other assets to the projects.

 

Trump stressed that the scale of the projects would be very large and they could not be made without his tariff policy. ”It will contribute to promotion of mutual interest of Japan and the U.S., to enhancement of economic security and to promotion of economic growth,” said Prime Minister of Japan, Sanae Takaichi. Embracing a concern that most benefit may be taken by U.S. side, there are some business entities that are interested in the bilateral projects for investment.

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