Japan and the United States are in the final stages of talks on leaving the possibility open that Washington will remove its 2.5 percent tariffs on vehicle imports from Japan in the future, when the two countries sign a bilateral trade agreement later this month, informed sources said Sunday.
Japan proposed including wording in an appendix to the envisaged trade agreement that opens the way for the United States to remove the auto tariffs in the future, the sources said.
Tokyo made the proposal out of concerns that the planned trade agreement will violate World Trade Organization rules requiring high levels of trade liberalization if the U.S. auto tariffs are maintained, the sources said.
Vehicles are a large part of trade flows between the two countries, accounting for as much as 30 percent of Japan’s total exports to the United States in value.
The U.S. Trade Representative’s office is also aware of the need to avoid the situation in which the trade agreement violates WTO rules, the sources said.
The appendix is expected to spell out the possibility that the trade agreement will be renegotiated after a certain period of time, the sources said.
But it is uncertain whether U.S. President Donald Trump, who puts priority on protecting auto industry jobs, will accept such a compromise. Even if he accepts it, he is highly unlikely to actually remove the auto tariffs.
The United States agreed to remove the auto tariffs in 25 years under the Trans-Pacific Partnership free trade pact, before Trump pulled out of the deal in 2017.
In negotiations on the bilateral trade agreement, the Trump administration declined to accept high levels of auto trade liberalization. Japan agreed to let the United States maintain the tariffs in an effort to avert additional levies being considered by Washington.