Trump Signs Mini Trade Deal With Japan With No Change in Auto Tariffs

President Donald Trump signed a limited U.S.-Japan trade agreement, which returns benefits American farmers lost when Trump pulled out of a broader Asia-Pacific pact his first week in office.

While rewarding American farmers, the negotiated deal does not resolve differences over trade in autos, but it does include market-opening commitments on $40 billion worth of digital trade between the two countries.

Trump has said the two countries will continue to work on a more comprehensive agreement.

U.S. farmers have been operating at a disadvantage in Japan since Trump withdrew from the Trans-Pacific Partnership agreement, negotiated by the Obama administration. The other 11 Pacific Rim countries, including big farm producers such as New Zealand and Canada, went ahead without the United States and were enjoying preferential treatment in Japan.

Under the agreement, Japan—which imports U.S. farm products worth $14 billion—will open new markets to approximately $7 billion in U.S. agriculture products, with lower or no tariffs on American beef, pork, wheat, cheese, corn, wine, and more. In prepared remarks, Trump called the agreements “a game changer for our farmers.”

But Tami Overby, senior director on Asia and trade issues at the McLarty Associates consultancy, said America’s competitors in agriculture got a two-year head start under the Trans Pacific Partnership agreement and used it to sign multi-year contracts in Japan to sell farm products. “We’re going to have to thrash back and fight for lost market share,” she said.

While the Japan mini-trade deal, Overby said, “is important, it’s still not the whole enchilada.” U.S. business groups are holding out for a broader deal that would give American companies more access to Japan in businesses such as insurance and pharmaceuticals.

Japanese automakers disappointed

Regarding autos, Trump made no mention of his current stance on lowering U.S. tariffs on Japanese imports. In fact, previously he’s threatened to impose higher import taxes on foreign autos, claiming they pose a threat to U.S. national security. Additionally, Trump has long complained about America’s large trade deficit with Japan, which came to $58 billion last year.

However, at last month’s UN general assembly, Japanese Prime Minister Shinzo Abe told reporters Trump had assured him a previous agreement to spare Japan from new auto tariffs still stood.

Japan is America’s third largest export market. The two countries’ economies are intertwined, with Japan also producing autos in the U.S. Japan is the world’s third-biggest economy behind the United States and China.

After the deal was negotiated, Japanese automakers expressed disappointment the United States kept existing auto tariffs at 2.5%.

At the time, Toyota Motor Corp. President Akio Toyoda urged his government to do more for the auto industry.

“The auto industry already faces extremely difficult challenges amid the rising Japanese yen, the possible impact from the upcoming sales tax increase and other uncertainties,” said a grim-faced Toyoda, at a meeting with automakers, Trade Minister Isshu Sugawara, and top ministry officials.

“We do hope that the Japanese government understands the severe situation and provide us further support to help the auto industry to strengthen its competitiveness and grow as a strategic industry,” said Toyoda, who also heads the Japan Automobile Manufacturers Association.