Faced with the risk of a 25% tax on exported cars, Japan is firmly pursuing the goal of a 0% tax with the United States, differing from the recent UK-US agreement.
Japanese Prime Minister Shigeru Ishiba continues to emphasize the call for the complete elimination of tariffs in ongoing trade negotiations with the United States. In a television interview on Sunday, Mr. Ishiba affirmed the mutual benefits of a 0% tariff agreement while appreciating the positive progress of discussions and the 'constructive' cooperative relationship with U.S. President Donald Trump.
Japan aims for better conditions than the UK-US agreement.
Mr. Ishiba cited examples from the recent trade agreement between the U.S. and the UK, where most tariffs on UK exported cars were cut, but the basic 10% tax was retained. The Japanese Prime Minister emphasized that the country needs to pursue a higher goal, which is the complete elimination of tariffs.
In the agreement with the UK last Thursday, the U.S. agreed to reduce the tax to 10% on 100,000 luxury cars exported from the UK each year. Although he sees this as a beneficial achievement for the UK side, Mr. Ishiba believes that Japan can and should achieve better conditions.
Japan's automotive industry is suffering severe damage.
The automotive industry – a pillar of Japan's economy – is being heavily impacted by current tax levels. Japan's chief trade negotiator Ryosei Akazawa revealed that a Japanese car company is suffering losses of up to $1 million per hour just because of the 25% tax imposed by the United States on exported vehicles.
Currently, in addition to the 25% tax on cars, Japanese goods are also facing retaliatory tariffs of up to 24% when exported to the U.S. According to the Japan Automobile Manufacturers Association, Japan exported about 1.37 million cars to the U.S. last year, equivalent to a value of $41 billion.
Mr. Ishiba warned that high import tariffs not only increase costs for American consumers but also harm the U.S. economy. He stated that if the Trump administration imposes high import taxes, the volume of cars exported from Japan to the U.S. will decrease, raising car prices in the U.S. market.
Tense negotiations before the July 8 deadline.
During the questioning session in Parliament, Mr. Ishiba dismissed the possibility that Tokyo would agree to sign a temporary agreement with Washington without provisions related to car taxes. He argued that Japan is still investing and creating jobs in the United States; if Japan's automotive industry weakens, the country will no longer be able to contribute to the U.S. economy as before.
Washington is expected to impose a 25% tax on cars exported from Japan if the two sides do not reach a trade agreement before July 8. Bilateral trade negotiations are expected to accelerate at the end of this month, with Mr. Akazawa expressing hope for an agreement in June. However, a report from domestic media suggests that the actual timeframe could extend to early July – coinciding with Japan's national election period.
In addition to trade issues, Prime Minister Ishiba also warned against hastily reducing domestic consumption taxes, urging caution to avoid harming the Japanese economy.