U.S. President Donald Trump and Japanese Prime Minister Shigeru Ishiba failed to reach an agreement on a new trade deal that could alleviate the impact of automotive tariffs. “There are still points where our views remain divided,” Ishiba stated yesterday during the G7 meeting being held near Calgary.
A blow for the Japanese Industry
This failure is a significant blow for Japan, its economy, and its automotive industry, a pillar of employment and export. The sector accounts for 5.6 million jobs (or 8.3 percent of the workforce) and 10 percent of GDP.
It’s estimated major manufacturers like Toyota, Honda, Mazda and Subaru together face a loss of over $19 billion USD if 25-percent tariffs on vehicles are applied.
Ishiba under pressure
This political setback weakens Shigeru Ishiba, whom some had seen gaining popularity, with his approval rating having increased by 5 points (up to 38 percent) partly due to his stances against rising food prices. The PM’s negotiation tactics are now being questioned as Japan struggles to find an agreement and avoid further tariff barriers that could slow its economic activity.
Foreign policy showing its age
Japan had hoped to leverage its role as an investor—with $783 billion placed in the U.S. — and offer other concessions, from soybean imports to shipyards, to get tariff barriers removed.
However, so far, its efforts have amounted to little, even as other states (the U.K., China) have managed to find common ground with Washington.
Canada and the U.S. gave themselves 30 days yesterday to find an agreement on tariffs (hoping to abolish them). Let's hope the outcome of those negotiations will be more fruitful that they’ve so far proven for Japan.