U.S., Japan Reach Agreement on Trade Deal Framework, Reports Say

(Bloomberg) -- The U.S. and Japan agreed on a broad framework for a trade deal that will keep U.S. tariffs on Japanese automobiles in place for now, while removing barriers to beef and pork exports to Japan, Japanese media reported.

Robert Lighthizer, the U.S. Trade Representative, and Japan Economy Minister Toshimitsu Motegi reached an agreement in Washington on Friday, the Nikkei and Kyodo News reported, without citing sources. The U.S. currently has a 2.5% import tax on Japanese cars and a 25% levy on trucks from the nation. Japan will lower tariffs on U.S. beef and pork to the same levels as those proposed for the Trans-Pacific Partnership, they said.

The report raises the likelihood that U.S. President Donald Trump and Japan Prime Minister Shinzo Abe will make a trade announcement during the Group of Seven summit in France this weekend. Japan is seeking to stay in Trump’s good graces to avoid costly tariffs and retain positive relations with an ally that ensures its security against China and North Korea. Japan is also counting on U.S. support as its diplomatic spat with South Korea intensifies.

A draft agreement could be signed by the end of September, the Nikkei reported. Trump, who threatened to raise tariffs on the approximately $50 billion worth of cars and auto parts Japan exports to the U.S. annually, had hinted that there might be a deal in August.

Read why Tokyo is trembling over Trump’s auto tariff threat.

A deal with Japan would give Trump a victory in his trade wars. The U.S. President is escalating his trade war with China, announcing that an existing 25% tariffs on some $250 billion in imports from China would rise to 30% come Oct. 1. He also told U.S. companies to withdraw from China.

The latest actions are a sign of Trump’s growing frustration with the lack of progress in his trade assault on China and a slowing economy, according to analysts and people close to the administration.

“Trump will likely have to end the trade war if he wants to avoid a US recession and get re-elected next year,” said Shane Oliver, head of investment strategy and chief economist at AMP Capital. “At this stage there is still no end in sight and so share markets likely have to fall further to pressure Trump to solve the issue and de-escalate.”

Agricultural goods, automobiles and car parts were the focus of talks between the trading partners. The agreed framework calls for Japan’s tariffs on imported beef to be lowered gradually to 9% from 38.5%, the Nikkei said. Japanese automakers have expressed concern over Trump’s actions in the market.

Akio Toyoda, president of Toyota Motor Corp. and chairman of the Japan Automobile Manufacturers Association said in May he was “dismayed to hear a message suggesting that our long-time contributions of investment and employment in the U.S. are not welcomed.”

--With assistance from Matthew Burgess.

To contact the reporters on this story: Shoko Oda in Tokyo at soda13@bloomberg.net;Gareth Allan in Tokyo at gallan11@bloomberg.net

To contact the editors responsible for this story: Shamim Adam at sadam2@bloomberg.net, Reed Stevenson, Finbarr Flynn

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