United States President Donald Trump pressed Japanese Prime Minister Shinzo Abe to even out the trade imbalance between two countries. Photo: Privacy.

JAKARTA (TheInsiderStories) – The United States (US) and Japan have struck a limited trade deal that will cut tariffs on agricultural and industrial products as well as provide rules for digital trade while further staving off the threat of higher US car duties, Reuters reported. President Donald Trump and Japanese Prime Minister Shinzo Abe announced the agreement on Wednesday (09/25) in the sidelines of the United Nations General Assembly.

Trump said the first-phase deal would open up Japanese markets to some US$7 billion worth of US products annually, cutting Japanese tariffs on American beef, pork wheat, and cheese. While Abe said he had received reassurance from Trump that the US would not impose previously threatened “Section 232” national security tariffs on Japanese car imports.

Japan agreed to cut or eliminate tariffs on beef, pork and other commodities on a level similar to what Tokyo agreed to in the Trans-Pacific Partnership (TPP) – a trade deal that the president withdrew from during his early days in office. The deal could provide some badly needed relief to US farmers who have been hit hard by Trump’s trade fight with China.

“Under the market access agreement, we are announcing today that Japan will open new markets to approximately US$7 billion in American agricultural products,” Trump said alongside Abe in New York. “This is a huge victory for America’s farmers, ranchers, and growers. That’s very important to me,” he added.

“Between President Trump and I, myself, this has been firmly confirmed that no further, additional tariffs will be imposed. And with the entry into force of our trade agreements, I believe both of our economies will be able to further grow and develop, Abe told a news conference, Abe said.

US Trade Representative Robert Lighthizer said after a signing ceremony that the two countries would tackle cars in a later round of negotiations expected to start next April. Autos are the biggest source of the $67 billion US trade deal, and Trump has frequently complained that US automakers do not enjoy equal access to Japan’s market.

Japanese Foreign Minister Toshimitsu Motegi, who had negotiated the pact with Lighthizer, said that as long as the agreement was faithfully implemented, the tariffs would not be applied. A Japanese government statement also said further talks would seek to eliminate the existing 2.5 percent US tariff on Japanese cars and would not result in the imposition of US import quotas on Japanese autos.

Lighthizer, during a previous stint at the office of the US Trade Representative (USTR) in the 1980s, helped negotiate voluntary export restraints on Japanese autos, which led to increased US production by Japanese automakers. But Japan still exports about 1.7 million cars a year to the US, making up about 10 percent of US vehicle sales.

The US-Japan talks launched a year ago, hit a snag earlier this week as Japan had sought last-minute assurances that Trump would not impose the Section 232 tariffs. The USTR characterized the agreement signed by Trump and Abe as “early achievements” from their negotiations on market access for agriculture, industrial goods, and digital trade.

The deal could provide some limited relief for US farmers, who have been battered by China’s retaliatory tariffs against US soybeans, pork and other products in the 15-month-long trade war between Washington and Beijing.

Under the agreement, Japan would open new markets to about $7 billion in American agricultural products. Trump later praised China’s recent agricultural purchases as “goodwill” measures and said a deal with Beijing could come sooner than people think.

Trump also said signing ceremony with Abe that the deal’s first phase would cover $40 billion worth of digital trade between the world’s largest and third-largest economies. The USTR said about 90 percent of US food and agricultural products will receive duty-free or reduced-tariff access to Japan, but what will still be subject to a quota limiting the volume of US imports.

However, many of the products gaining new access will still face tariffs that phase out over several years, including wine, ethanol, cheeses, processed pork, poultry, frozen potatoes, oranges, cherries, and egg products.

It said the tariff cuts on US farm products are “within the range” of tariff cuts granted to countries in the Trans-Pacific Partnership trade deal, which Trump quit in 2017. Japan will see reduced or eliminated tariffs on a small number of agricultural goods, including cut flowers and soy sauce, and a wide range of industrial goods, including steam power turbines, machine tools, bicycles, and musical instruments.

The digital trade agreement largely follows the US model of internet development, prohibiting taxes on cross-border digital downloads and rules requiring so-called data localization – the storing of data on devices physically present within a country’s borders, the USTR said.

The deal also limits the ability of the governments to demand source code from digital services providers for security or safety purposes, which the US says China widely practices.

Abe said the digital trade agreement would establish high-level rules in the sector. The agreement is important for two countries in terms of their leading the world in making rules for digital commerce, he added.

While the deals with Japan fulfills Trump’s desire to show some results on his trade agenda. Talks with China are creeping along with no substantive agreement insight and efforts to get a NAFTA replacement deal passed in Congress could fall victim to politics related to an impeachment inquiry from House Democrats.

Written by Lexy Nantu, Email: lexy@theinsiderstories.com