September 27, 2018 / 6:05 AM / 8 months ago

Breakingviews- Japan bends without breaking on U.S. trade

HONG KONG (Reuters Breakingviews) - Japan is bending without breaking on trade. Prime Minister Shinzo Abe finally agreed to bilateral talks with U.S. President Donald Trump on Wednesday. He had little choice given how vulnerable his nation’s automakers are to U.S. tariffs. Sticking with the Trans-Pacific Partnership that Trump abandoned, however, gives the Land of the Rising Sun some leverage.

    The embattled White House, fighting multiple fronts on the trade war it initiated, is in the market for a quick win. With imported cars targeted by Trump for a potential 25 percent duty, Japan makes a good candidate. More than a third of Japan’s 4.7 million vehicle exports last year were to the United States, and two-thirds of its $69 billion surplus with the country was from autos.

     Changing that will be tricky, though. The likes of Toyota and Honda make cars Americans want to buy, but the gas-guzzling SUVs and pickup trucks rolling off U.S. production lines are of less interest in Japan. Ford said in 2016 it would abandon the market entirely.

     Abe can’t force his citizens to buy F-150s, but he might be able to persuade manufacturers to expand their U.S. factories. That would tick Trump’s “Made in America” and jobs boxes. The fear is he demands a quota on exports as happened with South Korea.

    The two countries also suggest that any Japanese concessions in agriculture will be limited to those already made in “previous economic partnership agreements” – in other words, TPP. That should be helpful for the just-reelected Abe and his party. As in other developed economies, Japanese farmers punch above their weight in political clout and have much to fear from U.S. agribusiness. That American officials conceded on the issue validates Japan’s decision to press ahead with the regional pact even after Trump withdrew.   

    Finally, both sides say they’ll work to protect themselves from “non-market oriented policies and practices by third countries”. This sounds like code for keeping pressure on China amid efforts to reform the World Trade Organization by closing loopholes abused by state-controlled companies in the People’s Republic. If Abe can satisfy Trump on cars and redirect more of his attention to Beijing, the bilateral flexibility could pay off multilaterally.


Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

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