FOCUS: "Japan first" push puts PM in dilemma on Trump tariffs ahead of polls
By Noriyuki Suzuki, KYODO NEWS - 9 minutes ago - 17:09 | All, Japan, World
Japanese Prime Minister Shigeru Ishiba ended up empty handed in what was viewed as a high-stake meeting with U.S. President Donald Trump in Canada to clinch a deal over U.S. tariffs, suggesting he is in a dilemma as he seeks to put "Japan first" ahead of a must-win national election.
Ishiba, whose premiership could be put in peril with another election loss, is treading carefully not to be perceived as yielding to Trump's "America First" pressure and is making his case that there will be no agreement if it hurts Japan's national interest.
He also hopes to set a precedent for other countries that negotiations on U.S. tariffs can produce results that can benefit both sides, not one side, without stepping back from Japan's long-held role as a defender of free trade under multilateral arrangements, trade experts say.
High on the protection list are autos, as the sector serves as the backbone of the export-driven Japanese economy. But Japan's persistence in demanding a 25 percent auto tariff imposed by the Trump administration be removed -- or reduced at least -- complicates bilateral negotiations, they say.
Speaking to reporters after his meeting with Trump on Monday on the fringes of the Group of Seven summit in Canada's picturesque Kananaskis, Ishiba admitted that last-ditch efforts to reach an agreement had continued.
"We negotiated to the greatest extent possible over the possibility (of a deal)," he said. "We spoke our hearts out to protect each other's national interests."
The meeting capped six rounds of bilateral ministerial-level tariff negotiations, which started in April after Trump imposed new tariffs on steel, aluminum and autos while threatening further "reciprocal tariffs" that could be raised to as high as 24 percent against imports from Japan.
Expectations had grown that some sort of agreement could come out of the sit-down between Ishiba and Trump, the second of its kind since February. But the only thing the two leaders agreed upon during their half-hour talks was to accelerate negotiations.
Junichi Sugawara, senior fellow at Owls Consulting Group Inc., said gaps over the auto tariff likely prevented what could have been the "best scenario" for the latest summit -- namely to reach a broad agreement the details of which could be later hammered out by working-level officials.
"Ultimately, it boils down to whether Japan can come up with plans that are strong enough to prompt Trump to say 'yes' to," said Sugawara, an expert on trade negotiations, referring to proposals on energy investment and ways to enhance economic security in the face of China's growing global influence.
Japan has urged the U.S. government to reconsider its tariff policy, which Trump has implemented as a way to reduce his country's massive trade deficit.
Last year, Japan shipped around 1.38 million cars to the United States, accounting for more than a quarter of U.S.-bound shipments from Japan in value. The higher levy on U.S.-bound automobiles, therefore, would have a strong bearing on Japanese automakers.
When Japan held trade negotiations with the United States under Trump's first term as president, it scrambled to fend off a threatened higher auto tariff and barely escaped from the levies by agreeing to cut tariffs on U.S. farm produce such as pork and beef.
As Japan braces for a House of Councillors election on July 20, months after Ishiba's ruling coalition lost its majority in the more powerful House of Representatives in a general election, making easy concessions in tariff talks was never on the table.
"Accepting the 25 percent auto tariff would have prompted a strong backlash from labor unions and industry groups and hurt voter support," said Hideo Kumano, an executive chief economist at the Dai-ichi Life Research Institute.
"It's the right thing to avoid rushing to a deal because it may be better to see how other countries negotiate their own deals," he said.
Yet, without a deal, the economic repercussions will be felt. The major automakers may be able to withstand the effect of the auto tariff for the time being, but the situation will be different for smaller suppliers, according to Kumano.
If Trump's tariff policy translates into negative growth for the U.S. economy, this would be a source of concern for Trump and could prompt a rethink.
The Japanese economy, meanwhile, is in on shakier ground, with the elevated prices boding ill for the July upper house election.
The tariff negotiations also have diplomatic implications, which Ishiba is keenly aware of. The prime minister has told fellow lawmakers that when he holds talks with foreign leaders, they spend a large amount of time talking about Trump.
"We are negotiating representing Asia," he was quoted as saying about the Japan-U.S. tariff talks.
In the run-up to the summit with Trump, Ishiba held a series of phone calls or in-person meetings with most of the members of the trans-Pacific free trade pact that Japan salvaged following the U.S. withdrawal during Trump's first term.
Ishiba, delivering a speech at a recent event to discuss the future of Asia, said Japan will take the lead in expanding the so-called Trans-Pacific Partnership framework to include more members of the Association of Southeast Asian Nations and the European Union.
Sugawara, the trade expert, said when the United States is using "economic coercion" to urge Japanese action, Tokyo will have little choice but to explore ways to reduce its overdependence on the key market and find alternatives. The TPP, formally known as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, could be a key arrangement.
"What Japan should do is to first prioritize its bilateral negotiations with the United States. It also needs to promote dialogue with ASEAN or Europe and keep them updated" as they are also suffering from Trump's tariffs, Sugawara said.
"If Japan thinks it can still demand the complete removal of the auto tariff, realistically it'd be a tall order," he said. "But they can work to find common ground in a way that can be logically explained to the peoples of both nations."
Related coverage:
PM Ishiba says Japan Inc. suffering under Trump tariffs
Trump says he sees chance of trade deal with "tough" Japan
Japan, U.S. fail to reach tariff deal at Ishiba-Trump summit
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