Business

U.S. unlikely to remove tariffs on Japan auto parts in trade deal

Kyodo

The United States is not expected to remove tariffs on imports of Japanese automobile parts in a trade agreement that the two governments plan to sign next week, sources familiar with bilateral relations said Friday.

U.S. President Donald Trump is seeking to boost support from the automobile sector ahead of the 2020 presidential election.

In addition to auto parts, Japan has failed to persuade the United States to eliminate tariffs on Japanese cars, and the Trump administration is also unlikely to scrap tariffs on steel and aluminum imports from Japan, the sources said.

The two governments are planning to sign the deal when Trump and Prime Minister Shinzo Abe meet on the margins of the U.N. General Assembly in New York next week.

The envisaged deal would see tariffs cut or eliminated on chemical and other industrial products from Japan.

But given that vehicle and auto parts are Japan’s main exports to the United States, a trade deal that does not include the elimination of duties on these products would not be of much significance to Japan.

Japan is hoping to at least win assurances from the Trump administration that it will continue to exempt the country from imposing higher tariffs on auto imports and that it will not demand voluntary export restraints or quotas on cars from Japan.

Foreign Minister Toshimitsu Motegi, who has represented Japan in bilateral trade negotiations, said Tuesday that the United States is expected to pledge, in writing, not to impose additional tariffs on Japanese car imports.

Japan has been pushing for the removal of U.S. tariffs on Japanese vehicles, including a 2.5 percent levy on cars and auto parts, including engines and gear-related parts.

The administration of former U.S. President Barack Obama had agreed to the elimination of these tariffs in the original Trans-Pacific Partnership deal, a free trade agreement that it signed with Japan and 10 other regional economies in 2016.

However, Trump withdrew the United States from the TPP in 2017, citing his preference for bilateral deals.

Tokyo levies no taxes on American and other imported vehicles.

Aside from concessions on auto-related tariffs, Japan plans to reduce levies on American agricultural products to levels agreed to in a revised TPP, an 11-member FTA, in its planned deal with the United States.

For example, Japan’s 38.5 percent tariff on American beef imports will be lowered in stages to 9 percent over 16 years in line with an agreement in what is formally known as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.

Because Japan apparently has failed to use the gap in farm tariff levels between the United States and farming nations among CPTPP members — such as Australia and Canada — as leverage in scrapping U.S. levies on Japanese car and auto parts imports, opposition parties are likely to grill Abe’s ruling coalition when they deliberate the bilateral deal in an extraordinary Diet session to convene in October.

Under the TPP, the United States had agreed that its tariff of 2.5 percent on Japanese automobiles would be eliminated incrementally over 25 years, but it was to immediately scrap duties on more than 80 percent of auto parts imported from Japan.

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