The talks between Prime Minister Shinzo Abe and U.S. President Donald Trump, on the sidelines of the United Nations General Assembly in New York, resulted in an agreement for the two governments to start bilateral negotiations for a trade agreement on goods (TAG). While concurring to enter bilateral trade negotiations that Tokyo has so far strongly resisted, a joint statement by Abe and Trump said the United States would not impose the threatened higher tariffs on Japanese auto exports — which have been a major source of concern for Japan since it would have had a huge impact on its economy — as long as the TAG talks are under way. The U.S. also said it "respects" Japan's position that it would not lower tariffs on agricultural imports beyond levels already promised in multilateral trade agreements such as the Trans-Pacific Partnership.
It looks like Japan managed to avert much-feared tariffs on its auto exports to the U.S. by agreeing to enter the bilateral trade negotiations, which it had shunned in favor of multilateral free trade regimes. The government says it held to its position on the domestically sensitive agricultural trade. Still, the Trump administration, with its "America First" protectionist agenda, has rejected multilateral trade talks and sought to take advantage of its position of power over other parties in bilateral negotiations to win trade terms favorable to U.S. interests. Since Japan relies heavily on the U.S. on matters of regional security, including the problems over North Korea, the upcoming talks will test how firmly the Abe administration can hold Japan's ground. Tokyo is urged to maintain its emphasis on multilateral free trade rules even as it enters the bilateral talks with the U.S.
As it seeks to woo U.S. voters ahead of the crucial midterm elections in November, the Trump administration has stepped up its campaign to cut trade deficits with the U.S. trading partners, entering a trade war of retaliatory tariffs with China. Trump has also made it clear that the administration is unhappy with the U.S. deficit with Japan — nearly two-thirds of it from the automotive trade.