Trump Threatens to Increase Levies on Japan as Trade Negotiations Escalate

Strategic Insights -

US President Donald Trump has ignited fears of a renewed global trade war by threatening to raise tariffs on Japan and expressing doubt over the possibility of a trade deal between the two nations. Trump's remarks came as tensions between the US and Japan continue to escalate, with the two sides struggling to reach an agreement on trade. The threat to increase levies on Japan has sent shockwaves through global markets, with the yen edging down 0.3 per cent against the dollar to trade at Y=143.75. Japanese Prime Minister Shigeru Ishiba has warned that Tokyo will protect its interests at all costs in the tariff negotiations with the US. The US has imposed a tariff of 24 per cent on all imports from Japan, before temporarily lowering it to 10 per cent for 90 days to allow talks to take place.

Key Takeaways:

  • Trump has threatened to raise tariffs on Japan to 30-35% if a trade deal is not reached by July 9.
  • The US has a trade deficit of $63bn with Japan, mainly due to cars, industrial machinery, and electrical machinery.
  • Japanese Prime Minister Shigeru Ishiba has vowed to protect Tokyo's interests at all costs in the tariff negotiations with the US.
  • US and Japanese trade officials have been locked in intense negotiations, with Japan insisting on a guarantee that any deal struck will be final.
  • Japan's exports to the US are subject to a 10% tariff, while cars and car parts face a 25% border tax tariff.
  • Japan's largest imports from the US are power generation machinery, energy, and cereals.

Statistics:

  • $63bn: The size of Japan's trade surplus with the US in the most recent financial year.
  • 24%: The tariff imposed by the US on all imports from Japan.
  • 10%: The temporarily lowered tariff on imports from Japan to allow for trade talks.
  • 90 days: The duration of the tariff reduction on imports from Japan.
  • 30-35%: The possible new tariff rate on imports from Japan if no deal is reached.
  • Y=143.75: The rate of the yen against the dollar after Trump's comments.
  • 0.3%: The decline of the yen against the dollar.
  • 0.6%: The decline of the Japanese export-oriented Nikkei 225 index by the afternoon.
  • 0.2%: The decline of the Japanese benchmark Topix.

Sources:

  • "Donald Trump threatens to raise tariffs on Japan to 30pc" by AIME WILLIAMS -- WASHINGTON LEO LEWIS -- TOKYO (external reference not provided).
  • "US and Japan in trade war deadlock" by George Steer in New York, William Sandlund in Hong Kong, and Harry Dempsey in Tokyo (external reference not provided).
  • "Japan's prime minister vows to protect country's interests in trade talks" by Donald Trump (external reference not provided).