Tensions between Tokyo and Washington are casting a shadow over a key trade agreement. Japan refuses to back down, insisting on the removal of harsh U.S. tariffs on its car exports. If no deal is reached soon, it could impact both the economy and the political future of Prime Minister Shigeru Ishiba.

🔹 Japan Draws a Line: Tariffs Must Go

Prime Minister Shigeru Ishiba made it clear that Japan will not accept any deal unless the 25% tariffs imposed by the Trump administration on Japanese cars are scrapped. These tariffs have significantly harmed Japan’s auto sector – the backbone of its export economy.

Cars and car parts are Japan’s top export to the U.S. In 2024, they accounted for 81% of Japan’s trade surplus with America, which reached over $63 billion.

🔹 Negotiations Stall as Elections Loom

According to Tokyo officials, it's now unlikely that a deal will be reached before the upper house elections in late July. These elections are crucial for Ishiba’s already unpopular administration.

While Japan had previously prioritized securing a spot at the negotiation table, it’s now shifting focus toward securing a favorable outcome rather than a fast one.

🔹 Ishiba Under Pressure: “I Won’t Sacrifice Cars or Farmers”

The Prime Minister is under internal pressure – not only from business leaders but also from members of his own Liberal Democratic Party. Many strongly oppose any compromise that could harm the car industry or domestic agriculture. Ishiba has repeatedly stated that he will not support any deal that weakens either of these vital sectors.

Analysts estimate that U.S. tariffs could slash profits at major Japanese automakers by ¥2 trillion (approx. $13.7 billion) this fiscal year. While price hikes may cushion some of the blow, Japan’s economy has already dipped, marking its first quarterly decline in a year.

🔹 Japan’s Counteroffer: Cut All Tariffs

Japan has proposed a bold solution: remove all newly imposed U.S. tariffs, including those on steel, aluminum, and vehicles. Some duties have already been temporarily lowered to 10%, but Tokyo wants more – ideally, to link tariff reductions to the level of Japanese investment in the U.S.

In addition, Japan is offering to increase purchases of American agricultural goods, improve access for U.S. cars, and even help finance a liquefied natural gas pipeline in Alaska.

🔹 Diplomacy in Motion, but Time is Ticking

Japan’s Minister of Economy, Ryosei Akazawa, has met twice with U.S. officials. Further talks are planned at the upcoming G7 summit in Canada. Finance Minister Katsunobu Kato is also set to meet U.S. Treasury Secretary Scott Bessent.

Complicating matters further are accusations from the White House that Japan is intentionally undervaluing the yen – adding more friction to the talks.

🔹 Could the Deal Collapse?

According to CLSA analyst Nicholas Smith, Japan is in a strong position, but Ishiba can’t afford to fold. If he fails to win tariff relief, “he’ll be like a man on a conveyor belt heading straight for rotating blades.” Politically, it would be a disaster.

Still, Ishiba insists he won’t trade lower car tariffs for a blow to Japan’s farming sector – which employs a huge portion of the population.



#Tariffs , #TradeWars , #TradingCommunity , #Japan , #usa


Stay one step ahead – follow our profile and stay informed about everything important in the world of cryptocurrencies!

Notice:

,,The information and views presented in this article are intended solely for educational purposes and should not be taken as investment advice in any situation. The content of these pages should not be regarded as financial, investment, or any other form of advice. We caution that investing in cryptocurrencies can be risky and may lead to financial losses.“