Japan begins tariff negotiations with Trump administration
In this DML Report…
Japan initiated tariff negotiations with the United States in Washington, led by its chief trade negotiator, Ryosei Akazawa, Japan’s minister of economic revitalization. The talks involve U.S. Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer, with President Donald Trump personally attending, signaling his direct oversight. Japan faces a 10% baseline tariff on all exports to the U.S. and a 25% duty on cars, auto parts, steel, and aluminum, after Trump paused a 24% reciprocal tariff for 90 days to allow negotiations. Tokyo aims to secure a full removal of these tariffs, while the U.S. seeks to address its $64.6 billion trade deficit with Japan, which exported $167.4 billion in goods to the U.S. in 2024 against $102.8 billion in U.S. exports.
The negotiations extend beyond tariffs to include non-tariff barriers, exchange rates, and energy projects like U.S. natural gas purchases. Trump has criticized Japan for maintaining a weak yen, which he claims disadvantages U.S. exporters, though recent dollar sell-offs have strengthened the yen. Japan, holding $1.1 trillion in U.S. Treasury bonds and being the largest foreign investor in the U.S., plans to leverage these assets in talks, with economic advisor Takeshi Niinami emphasizing investment opportunities. Prime Minister Shigeru Ishiba has rejected retaliatory tariffs and major concessions, prioritizing Japan’s national interests and a deliberate approach to avoid rushed agreements.
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The talks are a test case for Trump’s broader trade strategy, with over 75 countries seeking negotiations after his tariff announcements. Japan’s auto industry, employing 5.5 million workers and accounting for 20% of its exports, is particularly vulnerable to the 25% car tariff. U.S. demands include lower taxes on American tech firms and commitments to block China from using Japan to bypass U.S. tariffs. While Japan seeks to limit discussions to trade and investment, the inclusion of currency policy and energy deals complicates the agenda. Outcomes remain uncertain, with markets and global economies watching closely for signs of escalation or resolution in the U.S.-Japan trade relationship.