Trump's Trade Deal with Japan: A Mixed Bag of "Wins" and "Losses"

The Trump administration's trade deal with Japan has been hailed as a major victory, with President Trump claiming that it marks the "opening of Japan's markets to the US for the first time ever" due to his use of "tariff power." However, a closer look at the deal reveals that it is more a framework than a finalized agreement, and the reality may be less rosy than the administration's boasts.

Key Takeaways:

• The deal sets a 15% tariff rate on Japan's exports to the US, which is less than the 25% Trump had threatened but higher than the less-than-2% average rate on Japan's exports to the US before his trade wars began.
• Japan has agreed to open its market to US autos, but only if they meet its own safety standards, which may be a challenge for US car manufacturers.
• Japan's concession is that US companies will be able to sell more cars to Japan, but the Japanese market is a tiny one for them.
• US car companies have essentially vacated the market for small cars, which is what Japanese consumers prefer.
• The US imports most of its smaller vehicles, and Japan is unlikely to buy what America has to sell.
• Japan has promised to invest up to $US550 billion ($830 billion) in the US, but details are scarce and the funds may come in the form of loans or loan guarantees rather than direct investment.
• The deal is a peculiar one if Trump's aim is to reduce America's trade deficit, as increasing capital inflows from Japan would likely increase the deficit.
• The 15% tariff rate on Japan's exports to the US is likely to increase the trade deficit and push up the value of the US dollar, making US exports less competitive in international markets.

Statistics:

• 15% tariff rate set on Japan's exports to the US
• Japan's workforce accounts for about 8% of its workforce and accounts for about 80% of its $US70 billion ($106 billion) trade surplus with the US
• Japan imports up to 770,000 tonnes of rice a year, with the US supplying about 45% of that volume
• $US550 billion ($830 billion) in funding promised by Japan for investment in the US
• Average effective US tariff rate has risen from about 2.4% before Trump took office to around 20%
• US inflation rate and interest rates are likely to be higher than they would otherwise have been due to distorted trade flows and disrupted global supply chains

Sources:

• "Donald Trump hails US trade deal with Japan" by Economics (exact date not specified)
• Office of the US Trade Representative (exact date not specified)
• "US trade deficit: How it's impacting America's economy" by CNN (exact date not specified)
• "Trump's trade wars: A timeline" by NPR (exact date not specified)