The Japan-US tariff negotiations show signs of stagnation

The Japan-US tariff negotiations show signs of stagnation. US President Trump began to inform trading partners of the new tariff rates that will be implemented from August 1 at noon on the 7th, Eastern Time (early morning on the 8th, Beijing time). First, Japan and South Korea were notified that a 25% tariff would be imposed, and the tariff rate would be further increased if retaliatory measures were taken. Japan and the United States have failed to narrow their differences on automobile tariffs and have not yet reached an agreement. It is difficult for Japan to make concessions during the Senate election, and the progress of the negotiations will depend on the election results.

US President Trump said on the 4th that he had signed a document notifying trading partners of the new tariff rates. The new tariff rates “range from about 60-70% to about 10-20%.” Some analysts believe that the United States is set to launch the new tariff rates in August with the purpose of forcing the negotiating partners to make concessions.

The United States negotiated with various countries and regions with the 9th, when the grace period for the domestic part of the reciprocal tariff ends, as the deadline. The three countries that have achieved certain results are the United Kingdom, Vietnam, and Cambodia. The United States and China have also reached an agreement to ease tensions.

In an interview with CNN on the 6th, U.S. Treasury Secretary Benson emphasized that August 1st “is not a new negotiation deadline.”

There are more and more opinions within the Japanese government that “the negotiation period has actually been extended” due to the launch of new tariffs in August (senior official in the economic department).

There are great differences between Japan and the United States on the issue of automobile tariffs. Japanese Minister of Economics and Finance Ryomasa Akasawa, who is in charge of the negotiations, visited the United States seven times from April to June and continued ministerial consultations. However, the two sides failed to reach an agreement in the dialogue, which once triggered speculation that he would visit the United States again before the 9th.

In Japan, from the announcement on July 3 to the vote on the 20th, it is the Senate election period. Trump said that the tariff rate on Japanese imports may be increased to “30% or 35%.” Japanese Prime Minister Shigeru Ishiba emphasized on the Japan Broadcasting Corporation (NHK) program on the 6th regarding the Japan-US tariff negotiations that “it will not be easy to compromise and it will take time.”

On the U.S. side, Benson pointed out that “Japan will hold a Senate election on the 20th, and there are many domestic constraints in reaching an agreement.” He also said, “We will wait and see how the negotiations with Japan go,” implying that no agreement can be reached before the 9th.

Even if the negotiations are postponed until after the Senate election, whether an agreement can be reached depends on the election results. As the president of the Liberal Democratic Party, Shigeru Ishiba has set a goal for the two ruling parties, the Liberal Democratic Party and the Komeito Party, to secure a majority in the Senate (125 seats). 75 seats will not be re-elected this time, so if the number of seats won in the election is less than 50, there will be a lot of variables, including the political framework.

The early situation survey of the Senate election conducted by the Nihon Keizai Shimbun (Chinese version: Nikkei Chinese website) on the 3rd and 4th showed that the Liberal Democratic Party and the Komeito Party were in a difficult battle in the “one-person district” where the re-election quota was 1, which could influence the overall election. Deciding to raise tariffs during the election will deal a blow to the government.

Even if the cabinet ministers in charge deepen their personal relationships during the Japan-US negotiations during this period, it will be difficult to make decisive concessions if the political foundation in Japan becomes unstable, and the impact on the negotiations will be inevitable.