MAY 26, 2019 02:47 JST
TOKYO — As Japan and the U.S. resumed trade talks here Saturday with auto tariffs remaining a key sticking point, President Donald Trump said that a major announcement should be expected in the coming months.
Negotiations were held between U.S. Trade Representative Robert Lighthizer and Toshimitsu Motegi, Japan’s minister for economic and fiscal policy. The chief negotiators were “hard at work,” Trump, who is visiting Japan for several days, said at a meeting with business leaders in Tokyo on Saturday evening.
“Japan has had a substantial edge for many, many years, but that’s okay,” Trump said. “We’ll get it a little bit more fair.”
The president said that he wants to “address the trade imbalance” and “remove barriers to U.S. exports” through the deal. Trump said that “we’re getting closer” and “we hope to have further announcements soon and some very big ones over the next few months.”
Trump seeks to secure a quick deal ahead of next year’s U.S. presidential race, and Japan intends to cooperate. Yet the two sides started negotiations on auto tariffs just last month, with their positions remaining far apart. Tokyo is pushing back on additional levies or quotas while Washington looks to draw in agricultural goods and currency issues to extract concessions.
Lighthizer and Motegi’s meeting was expected to help lay the groundwork for Trump’s summit with Prime Minister Shinzo Abe on Monday.
The ministerial-level talks lasted roughly two and half hours. “Our positions do not completely agree, but we agreed to work toward filling that gap,” Motegi told reporters after the meeting.
Motegi said that there was a significant rift over auto and agricultural tariffs. Auto quotas and currency issues “did not come up at all,” he added. Motegi also noted that negotiations at Monday’s summit “will not become an agreement.”
The largest sticking point will be how to handle auto duties. Tokyo has asked Washington to eliminate tariffs on auto parts Japan exports to the U.S., but the White House is hesitant about doing so.
The U.S., for its part, has dangled the threat of an additional 25% tariff and quotas on foreign cars, citing the growth in such imports as a national security threat. Tokyo has called these proposed measures a “hard red line.”
The Japanese government, however, may face the difficult prospect of giving ground on its request for the U.S. to eliminate tariffs on auto parts to avoid the additional duties and import quotas.
Entangled in the conversation over auto imports is agricultural goods. Japan has sought to consolidate tariff negotiations over industrial products, including vehicles, and farm products.
Tokyo is prepared to lower tariffs on U.S. agricultural goods to the same level to which it agreed in the Trans Pacific Partnership, before Trump pulled out of the deal. By lowering duties on American farm products, Japan plans to cast a U.S. refusal to make concessions of auto-related tariffs as unfair.
Currency provisions are also set to become a bargaining chip, intertwined with autos and agricultural goods. Treasury Secretary Steven Mnuchin has demanded that currency provisions be included in a trade deal, but Japan has resisted. The U.S. Department of Commerce said Thursday that it is considering placing tariffs on trading partners that devalue their currency, treating such practices as subsidies.
The U.S. may place more pressure Japan over currency issues if Trump is dissatisfied with how trade talks progress.