US - Japan Trade Deal Reached

By Chris Sevcik, Director of International Trade Services, WTCGP

​The US and China recently signed a limited trade deal addressing US farm goods, Japanese machine tools and digital trade. The limited trade deal is meant to mirror the Trans Pacific Partnership (TPP), and according to a senior administration official, “help producers keep pace with foreign competitors who are increasing sales in Japan now that the 11-nation TPP is in effect, without the US.”  

The new US-Japan trade deal is designated as limited since it does not address automotive tariffs.  The United States had threatened to enact Section 232 of the Trade Expansion Act of 1962 that would allow the US to place tariffs on autos in the name of national security.  With the limited trade deal, Japan trusts that the US will not pursue the tariffs so long as the agreement is faithfully implemented by Japan.

The current limited trade agreement will reduce or eliminate tariffs on US cheeses, processed pork, poultry, beef offal, ethanol, wine, frozen potatoes, oranges, fresh cherries, egg products and tomato paste.  The agreement will also prohibit customs duties on digitally transmitted music, software and videos.  

The limited trade agreement is only the first phase of a more comprehensive agreement, according to the Trump administration.  “In the fairly near future, we are going to be having a lot more, very comprehensive deals, signed with Japan,” President Trump remarked.  US Trade Representative, Robert Lighthizer, explains that the US and Japan were expected to meet next April for the next round of negotiations and both sides will revisit the issue of automotive tariffs at that time. 

The US-Japan trade agreement, initiated over a year ago, had run into issues earlier in the week when Japan wanted assurance that President Trump would not initiate Section 232 tariffs.  While the United States did not expressly say that they would not initiate the tariffs, it is understood that as long as both parties faithfully implement the limited trade deal, Section 232 tariffs will not be imposed.