Trade with Japan not as big a problem for Donald Trump as China

When President Donald Trump visits Japan, he’ll be able to point to Tokyo’s streets to drive home a sore point in trade relations between the allies: the absence of made-in-USA vehicles.

The USD 70 billion Japanese trade surplus with the US is dwarfed by China’s USD 379 billion surplus, and the trade tensions between Washington and Tokyo are far less contentious than the tariffs war with Beijing.

But the disputes between Japan and the US are longstanding and also intractable: the bilateral agreement with Tokyo that Trump has been seeking since pulling out of the Trans-Pacific Partnership trade agreement two years ago is still far down the road, say analysts and politicians on both sides.

Prime Minister Shinzo Abe has carefully courted Trump since before he took office and their cordial, golfing-buddy relationship has helped keep relations on an even keel.

While Trump has complained repeatedly about the trade imbalance, especially in autos and auto parts _ the Hondas and Toyotas on US roads are a daily reminder _ friction over Japan’s exports has not reached the fever pitch it did in the late 1980s, when angry American auto workers smashed Japanese vehicles.

The Trump administration’s tough stance on China, including the tariffs on USD 200 billion worth of Chinese goods that recently kicked in, is almost a replay of the “Japan bashing” of decades ago.

To help alleviate tensions, especially over vehicle exports, Japanese automakers have moved much of their production for America to the US, investing a cumulative USD 51 billion and building 24 manufacturing plants, many in areas that have little else to count on to vitalize their economies. Those investments have created some 1.6 million jobs, according to the industry group Japan Automobile Manufacturers Association.

Trade remains unbalanced: In April Japan’s exports to the US jumped nearly 10 per cent, while imports of American goods rose 2.3 per cent. Japan’s trade surplus surged almost 18 per cent to 723 billion yen (USD 6.6 billion).

Trump sees today’s disputes as a continuation of earlier clashes, said Kristin Vekasi, professor of political science at the University of Maine.

She says current negotiations are unlikely to lead to any “miraculous” opening of Japanese markets for American products. Japanese officials have said they would draw the line at concessions made for the sake of joining the TPP, which had been championed by the administration of Trump’s predecessor, Barack Obama.

“Japan already buys a lot from the United States,” Vekasi said.

Japan’s imports from the US are dominated by food, chemicals, machinery and devices. Cars, not so much.

Detroit-based General Motors Co. sold just 562 Cadillacs, 708 Chevrolets, six Buicks and a handful of its other nameplate brands in Japan in the fiscal year that ended in March. In contrast, Toyota sold 2.3 million of the roughly 5 million vehicles sold in the Japanese market.

Experts generally agree the imbalance reflects a lack of Japanese interest, not significant trade barriers. Trade talks cannot dictate consumer tastes.

The Trump administration has designated auto imports as a threat to US national security, though the government has delayed a decision on raising tariffs on imported cars for six months.

Trump has suggested he will go ahead with the tariffs if US Trade Representative Robert Lighthizer, a trade talks veteran of the Japan-bashing days, doesn’t manage to wrest concessions from Japan and the European Union.

Apart from autos, Washington is worried that American farm products won’t get a fair deal, as Japan forges trade pacts with Australia and Europe.

While visiting Japan earlier this month, US Agriculture Secretary Sonny Perdue donned an apron and took up barbecue tongs, urging Japan to buy more American beef.

“We’re saying treat us as a prime customer the way we treated Japanese products for many years,” he said after grilling some beef and pork on a Tokyo shopping mall rooftop.

Perdue returned to Washington with a promise from Japan to eliminate restrictions on US beef exports. The move allows all cattle, regardless of age, to enter Japan for the first time since 2003, when Japan imposed limits to guard against bovine spongiform encephalopathy, or BSE, also known as “mad cow disease.”

The US Department of Agriculture estimates exports of US beef and beef product could jump by up to USD 200 million a year, though they do face stiff competition from Australia and China.

Japan still imposes limits on many farm products, seeking to guard its food security and politically important rural constituencies, and Perdue acknowledged that a broader trade deal with Tokyo may take time.

After years of being harangued to open their own markets, Japanese officials and business leaders are ardent proponents of freer trade.

Usually soft-spoken Toyota Chief Executive Akio Toyoda, who chairs the Japan Automobile Manufacturers Association, was blunt in expressing outrage over the idea that auto imports pose a security threat worthy of imposing tariffs.

“We are dismayed to hear a message suggesting that our long-time contributions of investment and employment in the United States are not welcomed. As chairman, I am deeply saddened by this decision,” he said earlier this week.

“Any trade restrictive measures would deliver a serious blow to the US auto industry and economy, as it would not only disadvantage US consumers, but also adversely affect the global competitiveness of U.S.-produced vehicles and suppress company investments in the U.S.”