Japan urges immediate U.S. tariff cuts as $500B trade deal stalls

Akimasa Akazawa, the Minister of State for Economic Revitalization and Japan’s top trade negotiator, revealed that tariff cuts on auto and spare parts imports could “take some time”. He urged President Trump to effect the revised tariffs immediately through an executive order instead of drafting agreements that could eventually become “vague.” 

Akazawa said Japan and the U.S. had agreed to reduce the tariffs on auto imports from 25% to 15%. He praised Trump’s deal-making skills, saying they were the kind that demanded answers. The Economic Revitalization Minister said he dared not remain silent through the negotiations, otherwise that would be “the end of it.” He asked Trump many questions, raising his hand a dozen times to ask “one more…”

The trade negotiator stressed the deal’s importance, saying his country had lowered the rates set to kick off on August 1 by 10 percentage points. He pointed out that this move helped Japan avoid losses of up to 10 million Yen.

Akazawa also mentioned the plan offering $500B (80T Yen) through state-affiliated institutions like NEXI and the Japan Bank for International Cooperation (JBIC). However, he emphasized that the funds were aimed at providing “economic security” in the bilateral trade deal. The Minister said the funds would be categorized as loans, investments, and loan guarantees.

Akazawa fears a written agreement could be ‘misinterpreted’

The Economic Revitalization Minister expressed fear that the U.S. would decide to make a written deal for the Japan-U.S. tariff agreement. He pointed out that a written deal could easily be “misinterpreted,” adding that it was “bad to create one now.” Akazawa acknowledged that an agreement would require confirmations between Trump and his cabinet members. He asserted that this could affect the document’s content, leading to further delays. 

However, Prime Minister Shigeru Ishiba and seven leaders of the ruling and opposition parties called for a written agreement during a July 25 meeting. They said an agreement needed to be signed despite fears that interpretation differences could raise misunderstandings between the U.S. and Japan.

Akazawa referenced the $500 billion Japan-U.S. deal to stress his point of view on deal misinterpretation. He noted that Japan’s losses would be in the tens of billions range if Japan allowed the U.S. to keep 90% of the profits, according to the latest 9-1 profit-split trade agreement, instead of 50% (at most).  

“The idea that cash will fly from Japan to the United States, and that 90% will be taken and we will become a slave state is completely off the mark and the height of absurdity.”

–Shigeru Ishiba, Prime Minister of Japan 

However, Akazawa defended this deal, saying the people who opposed it as “selling out Japan” were wrong. He pointed out that 1% to 2% of the $500 billion would go to investment; the rest would be loans and loan guarantees. Akazawa claimed that Japan would make money from collecting interest on loans, assuming nothing happens. Tokyo could save up to $68 billion (~¥10T) if the tariff-cutting deal with the U.S. went through.

Minister believes Japan may end up giving up less than expected

The Economic Revitalization Minister suggested that Japan might give up much less in the long run than previously expected. He clarified that the $500 billion investment deal was not limited to supporting only the U.S. and Japan.

Akazawa said officials from other countries were also sifting through trade deals to figure out the terms. However, he mentioned that details of how the deal would be implemented remained unclear. It was also unclear when the revised tariffs or the new investment program would kick in.

The Trump administration touted the U.S.-Japan deal as a model for other countries. The absence of a signed deal meant there was still room for negotiations. However, Akazawa expressed concerns over remarks made by U.S. officials claiming that the U.S. would only lower tariffs once the agreement was created. 

Last week, the veteran trade negotiator said he expected 15% tariffs on Japanese shipments on August 1. Prime Minister Ishiba said the negotiated deal protected “what must be protected” and suited the national interests of both countries. He pointed out that Japan obtained the biggest tariff reduction margin among countries that had trade surpluses with the U.S. 

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