Japan is giving the U.S. something to think about as Beijing begins trade talks in Washington today, with Tokyo saying it is considering over $400 million in tariffs on U.S. exports in a tit-for-tat move following U.S. steel and aluminum import tariffs.
According to local media, the Japanese government is preparing to notify the World Trade Organization (WTO) of its tariff plan.
Japan’s desire for retribution is clear as the only ally that hasn’t received exemptions from Trump’s tariff decisions, despite close ties between Washington and Japanese Prime Minister Shinzo Abe. The European Union, Canada and Brazil have all received exemptions.
Both the EU and China immediately threatened reciprocal tariff actions against the United States after Trump’s March tariff decision, which placed a 25-percent tariff on steel imports and a 10-percent tariff on aluminum imports. Japan initially refrained from reciprocating.
China increased tariffs by up to 25 percent on 128 US products, intensifying the lead-up to a major trade war. The European Commission likewise threatened to target a number of U.S. goods with tariffs, and insisted upon a permanent exemption without conditions.
The Japanese prime minister may now be thinking that a tariff threat could win an exemption at a time when Washington and Beijing are launching critical trade talks.
Right now, it’s a Trump-style leverage game, with Reuters quoting a Japanese government official as saying that no final decision has been made yet and that “We’re scrutinizing the impact of US tariffs on Japanese companies, and calling for Washington to offer Japan an exemption.”
Analyst would agree that this is a negotiating tactic. Related: Trump's Trade Dilemma: Export Growth Or National Security
“This would be a half-step forward since up till now, Japan was just making requests to the United States for an exemption,” Junichi Sugawara, an analyst at Mizuho Research Institute, told Reuters.
What’s at stake? Quite a lot: In 2016, Japan was the United States’ fourth-largest export market, worth more than $100 billion. But the American steel tariffs hit hard because Japan was also the seventh-biggest steel exporter to the U.S.
U.S. goods and services trade with Japan totaled around $270.7 billion in 2016, while exports accounted for $107.9 billion and imports $162.8 billion. The U.S. trade deficit with Japan in this category that same year was $54.9 billion.
What Japan will be targeting is agriculture, most likely.
U.S. agricultural exports to Japan were worth $11 billion in 2016, making it the fourth-largest agro export market for the U.S. Corn exports to Japan reached $2.1 billion I 2016, pork and pork productions hit $1.6 billion, beef/products $1.5 billion, soybeans $1 billion and wheat $610 million, according to government data.
U.S.-Chinese trade delegations are now holding a series of talks to discuss a potential solution for the initial $50-billio in tariffs proposed by Trump on Chinese goods, designed to balance the trade picture and punish Beijing for violations of U.S. intellectual property rights and technological innovation theft.
But there’s more to the timing of Japan’s tariff threat: Trump’s final decision on tariffs has been postponed until June 1—and that’s also when the finalized exemption list is set to be released.
By Josh Owens for Safehaven.com
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