U.S.-Japan Talks Heat Up and May Get Messy By Bloomberg

© Bloomberg. Toyota Motor Corp. Rav4 sport utility vehicles (SUV) bound for shipment sit at the Nagoya Port in Tokai, Aichi Prefecture, Japan, on Wednesday, June 12, 2019. Toyota brought forward an electrified-vehicle sales target by five years as demand picks up. The company expects to have annual sales of 5.5 million of such vehicles globally in 2025, compared with a previous target of 2030.

(Bloomberg) — With Japanese Prime Minister Shinzo Abe’s coalition on track to win a clear majority in the upper house Sunday, attention is likely to turn swiftly back to his policy agenda. And U.S. President Donald Trump may push trade up Abe’s priority list.

The pace of talks is expected to pick up rapidly in the coming weeks—and it could get a little messy. Trump has so far protected Japan from his threat of auto tariffs. But the U.S. president will want to see progress on a trade deal that addresses the U.S.’s almost $70 billion trade deficit with Japan and will require some concessions on farming, which is a sensitive area for Tokyo.

So far, it’s not clear what, if anything, the U.S. is willing to give Japan in return. Negotiations on the working level have been taking place weekly for more than a month and are resuming in Washington on Wednesday, according to a person familiar with the planning.

Japan is still developing its wish list and asking the Trump administration to lower or eliminate tariffs on a range of products, including auto parts and other industrial goods.

Japan’s Economy Minister Toshimitsu Motegi is expected to travel to Washington several times next month for negotiations with U.S. Trade Representative Robert Lighthizer, a person familiar with the plans said. Officials in both countries want to announce some sort of agreement when Trump and Abe meet at the UN General Assembly in September. But that’s an ambitious goal that will be hard to meet, a Japanese official said.

If talks aren’t moving fast enough, Trump might pull a familiar move: repeating his threat for duties on Japanese auto imports and opening another global front in his trade battle.

Charting the Trade War

Singapore’s exports plunged in June amid a collapse in technology-related shipments, according to data from Enterprise Singapore. Overall exports have been weakening since last year as a technology boom waned, but the outlook worsened considerably in 2019 amid a U.S.-China trade war.

Today’s Must Reads

  • Mixed WTO message | The Geneva-based trade body gave the U.S. a victory and a rebuke in a dispute over American sanctions on goods made by Chinese state-owned enterprises.
  • More Trump threats | The U.S. president reminded Beijing that he could hit more Chinese imports with tariffs as the two sides try to find a negotiating path to avoid escalating the fight.
  • Europe’s car trouble | Sales fell sharply in June as companies including Daimler and BMW struggle with what’s shaping up to be the industry’s second year of softening demand.
  • G-7 tax fight | The U.S. Treasury chief will clash this week with French Finance Minister Bruno Le Maire, who’s forging ahead with taxes Washington opposes on digital revenues of large companies.
  • Bond villain | China’s holdings of U.S. Treasuries slipped for a third month in May, reaching a two-year low, just as trade tensions between the two countries neared a boiling point.

Economic Analysis

  • Japan outlook | The economy faces challenges from U.S. tariffs to a looming sales-tax increase.
  • Soybean selloff | Futures prices of corn and soybeans succumbed to Trump’s latest China threat.

Coming Up

  • July 18: Japanese and Swiss trade data
  • July 23-24: WTO General Council meeting

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