After months of wrangling, the US and Japan have reportedly struck a trade deal.
Or, an “agreement in principle”, at least.
The news comes amid an otherwise contentious G-7 in France, where the US president is at odds with his counterparts on a variety of issues from trade to Vladimir Putin to climate change to Iran, whose sanctioned foreign minster Javad Zarif arrived in Biarritz on a surprise visit Sunday at the invitation of the French government.
Trump announced the deal with Japan, noting that it could be inked at the UN General Assembly.
For his part, Abe said there’s still some work to be done on the “wording” and “context”.
Bob Lighthizer, who accompanied Trump to Biarritz, said the US-Japan deal will open up markets for $7 billion in goods and that the agreement covers industrial tariffs, digital trade and, of course, agriculture. Apparently, Japan is going to buy a lot of US corn.
(If the video does not load, please refresh your page)
The deal will provide “major benefits for beef, pork and wine”, Lighthizer promised, adding that trade barriers and tariffs will be reduced.
Still, Trump said auto tariffs on Japan are “staying the same”, but this could inoculate the country from further vehicle duties.
Lighthizer remarked that he’s “looking forward” to completing the deal with Tokyo.
Perhaps this is proof that when it comes to the US president, over-the-top flattery does, in fact, work. Abe has gone to great lengths to curry favor with Trump and hosted him for a truly absurd state visit in May complete with a sumo wrestling trophy customized for the president.
The deal should come as a relief to Abe, who is grappling with a surging yen that threatens to act as a disinflationary shock at a time when the Bank of Japan is struggling to meet an ever elusive price target. Tokyo is effectively constrained by the trade frictions when it comes to any potential intervention to weaken the currency.
Abe and Trump are also at odds over a string of recent missile tests by North Korea, which the US president continues to downplay, much to Tokyo’s chagrin. “He hasn’t been doing nuclear testing. He has done short range, much more standard missiles”, Trump said Sunday. “A lot of people are testing those missiles, not just [Chairman Kim]”, he added. You can understand why that’s a bitter pill for Japan to swallow.
Japan is also embroiled in a worsening dispute with South Korea, which threatens to further undermine trade openness and comes at an especially inopportune time for Seoul. South Korea’s Kospi is among the worst-performing major equity benchmarks in the world. The BOK cut rates last month in a bid to bolster the export-dependent economy in the face of mounting risks, which now include a dangerous diplomatic row with Abe.
The US-Japan deal removes at least one trade-related land mine from an increasingly precarious field. Now we’ll see if Trump moves to deescalate trade tensions with Europe to avoid fighting a two-front war as tensions with Beijing escalate.