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Another Trump Trade Fiasco, This Time With Japan

Summary:
Hopes for a trade deal between the US and Japan have faded. Autos and Agriculture are the sticking points. Japan Trade Deal Hopes Fade It's not just China. No one should be surprised that Hopes of a Trade Deal With Japan Have Faded. “It will be a very tough negotiation,” said one of the officials, who spoke on condition of anonymity due to the sensitivity of the matter. “If there is to be an ‘agreement’ we need to have something we can formally announce, which is tough,” said another Japanese official, adding that it will be difficult to agree on a deal in September unless Washington makes more concessions. Four Hangups Washington is targeting Japan’s auto exports, which account for about two-thirds of the U.S. trade deficit with Japan at roughly 7 trillion yen (.82 billion) a year.

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Hopes for a trade deal between the US and Japan have faded. Autos and Agriculture are the sticking points.

Japan Trade Deal Hopes Fade

It's not just China. No one should be surprised that Hopes of a Trade Deal With Japan Have Faded.

“It will be a very tough negotiation,” said one of the officials, who spoke on condition of anonymity due to the sensitivity of the matter.

“If there is to be an ‘agreement’ we need to have something we can formally announce, which is tough,” said another Japanese official, adding that it will be difficult to agree on a deal in September unless Washington makes more concessions.

Four Hangups

  1. Washington is targeting Japan’s auto exports, which account for about two-thirds of the U.S. trade deficit with Japan at roughly 7 trillion yen ($65.82 billion) a year.
  2. Trump wants to open up Japan’s market for agriculture goods and beef. One demand Washington is making is for Tokyo to cut tariffs on U.S. beef and pork imports.
  3. Japan wants the United States to cut tariffs on imports of car parts and industrial goods - something Washington is reluctant to.
  4. U.S. automakers are also want to include a provision prohibiting both countries from engaging in currency manipulation. Japanese officials are opposed to adding such language in the deal, for fear of having their hands tied in battling any unwelcome yen spike that hurts the country’s exports.

Anything Else?

Just an observation that Trump does not trust Japan and Japan does not trust Trump.

Question of Trust

  • There is no reason for any country to trust Trump.
  • To be fair, there is no particular reason for Trump to trust either Japan or China.

Big Picture

It's important to stand back and look at the big picture.

If indeed Japan and China are subsidizing exports, that is to the benefit of US consumers.

We should welcome subsidies.

Remember TPP

Please recall that Trump cancelled TPP, the Trans-Pacific Trade Partnership, a trade agreement with Australia, Canada, Japan, Malaysia, Mexico, Peru, the United States, and Vietnam, now minus the US.

In that deal, Japan significantly lowered tariffs on agriculture for the TPP participants.

Australia and Canada were the primary beneficiaries.

It will now take huge tariff cuts by Japan just for the US to break even with where we could have been relative to Australia and Canada.

In return, Japan wants a further reduction in US auto tariffs.

Trump in a Box

Trump put himself in a box.

He has no winnable solution other than backing down.

But that is contradictory to his ridiculous message "Trade wars are good and easy to win."

Mike "Mish" Shedlock

Mike Shedlock
Mike Shedlock (Mish) is a registered investment advisor representative for SitkaPacific Capital Management (http://www.sitkapacific.com/). Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

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