Trump Tariff Deal Gives Japan the Short End of the Stick

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United States President Donald Trump has signed an executive order implementing the recently concluded Japan-US tariff agreement. When the deal was concluded in July, it did not specify when the US would implement it. Details of the agreement remained uncomfortably vague. However, we finally seem to be making tangible headway towards fleshing it out.

Now that the agreement is signed, the US is expected to reduce tariffs on Japanese cars from 27.5% to 15% within two weeks. A provision to reduce "reciprocal tariffs" with Japan will also be applied retroactively to August 7.

The two governments also signed a memorandum of understanding regarding Japanese investment in the United States. This aspect of the deal is something Japan had promised at the time of the agreement. A joint statement was also issued about it.

This time, the signing of the executive order was a matter of course, but long overdue. Questions remain about why it took so long, despite Japan's request for it to be expedited. It seems that in the rush to reach an agreement, the negotiators had avoided finalizing the details in writing. Perhaps that was the price of the negotiating strategy followed by the Shigeru Ishiba administration.

Higher Tariffs Put Japan's Economy at Risk

For Japanese companies, the resulting reduction in economic uncertainty caused by Trump tariffs is highly significant. Even so, the situation remains essentially unchanged. Japanese exports to the US are still subject to significantly higher tariffs than before.

There is great concern that the Trump tariffs will depress Japan's gross domestic product. They will also impact a wide range of small and medium-sized enterprises that support Japan's supply chain.

The government should take all possible measures to prevent this from detrimentally affecting employment or the reconsideration of planned wage hikes.

Until now, the US side had announced no timetable for lowering automobile tariffs. Also, contrary to the agreement, mutual tariff exemptions had not been applied.

Differences also surfaced in the respective explanations offered by Japan and the US regarding the allocation of profits from Japanese investments in the US.

These are things that should have been confirmed when the agreement was drafted. It is doubtful whether Japan's delays facilitated extracting favorable conditions or pinning down the details.

*US President Donald Trump with Treasury Secretary Scott Bessent on September 5. (©Reuters via Kyodo)*

$550 Billion in Japanese Investment

At the signing, both governments announced policies for expanding imports into Japan and other measures. These included expanding procurement of US defense equipment and increasing imports of US rice by 75% within the minimum access quota.

Nevertheless, vigilance is called for when implementing the agreement. Targets for the $550 billion USD (approximately ¥81.6 trillion JPY) of Japanese investment in the United States will be selected by the US president based on recommendations by an "Investment Committee." That committee, too, is chaired by the US side.

Doesn't it look like Japan will be unable to refuse the choices made and thus forced to take on unprofitable projects?

Danger in Unilateral Judgments

Under the agreement, the US will "monitor" Japan's implementation. Moreover, it could unilaterally raise tariffs again if it decides that Japan is not complying with the agreement's provisions.

In the past President Trump repeatedly criticized Japan for things that were contrary to the facts. Isn't there a danger that he will seek to impose his own self-righteous interpretations of the agreement in the future?

Nonetheless, were the agreement to be scrapped, it would leave a veritable minefield of unresolved issues.

Author: Editorial Board, The Sankei Shimbun

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