Japan’s Abe Faces Verdict on Bid to Tame Trump

(Bloomberg) --

Japanese Prime Minister Shinzo Abe could find out in a matter of days whether almost three years of cultivating U.S. President Donald Trump over golf and hamburgers have paid off.

Trump said this week his administration is nearing an initial trade accord with Japan covering tariffs and digital trade. Abe is holding out for a pledge that Trump won’t slap new levies on Japanese automobiles, the cornerstone of his country’s economy.

The upshot could become clear Sept. 25 in New York, when the two leaders are set to meet. 

The proposed deal won’t lower the barriers protecting Japan’s rice farmers -- something Abe could claim as a minor victory as he takes the deal back to parliament, where it must be ratified before coming into effect.

But removing the threat of punitive tariffs on cars would be a welcome relief for Japan’s economy, as a nine-month decline in the country’s overall exports accelerates amid U.S.-China trade tensions.

Abe has emphasized Japanese automakers’ contributions to the U.S. economy, and Toyota Motor Corp. and one of its suppliers announced a combined  $791 million investment in Texas as talks headed into what could be their final week.

A spiraling feud with South Korea is also beginning to take a toll on business ties between the two U.S. allies. South Korea on Wednesday removed Japan from a list of countries that receive preferential trade treatment — a decision Japan called “regrettable.”

Here are some of the bleak news for Japanese exporters released Wednesday:

• Total exports fell 8.2% year-on-year in August, the most since January
• Sales of chip-making equipment to China were down almost 40%
• Exports to South Korea slumped 9%, while shipments of organic chemicals fell 17%, and sales of food and drinks tumbled by 41% after some consumers boycotted Japanese products including beer

Charting the Trade War

Intensifying trade conflicts have sent global growth momentum tumbling toward lows last seen during the financial crisis, according to the OECD, which cut almost all economic forecasts it made just four months ago. The outlook has become “increasingly fragile and uncertain,” with trade taking an increasing toll.

Today’s Must Reads

• Global Gloom | For more on the OECD forecasts charted above, here are the details, with downgrades across the G20 nations and a call for governments to jump in with fiscal stimulus. 
• Identity Crisis | The trade war is taking a toll on Apple Inc., with the company tumbling to 24th in an annual report on China’s top brands, from 11th a year ago. 
• Artful Dodger |  Federal Reserve Chairman Jerome Powell isn’t showing his hand on rates, either to guide investors or to chart a path for a divided group of policy makers.
• Amazon Effect |  An Austrian parliament committee rejected a draft free-trade pact between the EU and South America over concerns about fires in the Amazon.

Economic Analysis

• Trade Jitters | When it comes to global growth, the tweet is mightier than the tariff.
• BOJ Unease | The Bank of Japan is uneasy about inflation, but may not pull the trigger on more stimulus.
• Fed Resistance | Fed’s baseline scenario suggests policy makers not inclined to aggressively cut rates. 

Coming Up

• Sept. 23: Latest snapshot of trade fallout in global manufacturing PMI

To contact the editor responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Brendan Murray

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