RPT-BREAKINGVIEWS-Japan highlights Trump’s limited tariffs leverage

By Hudson Lockett

HONG KONG, April 24 (Reuters Breakingviews) - “The worst thing you can possibly do in a deal is seem desperate to make it,” Donald Trump wrote in The Art of the Deal. “That makes the other guy smell blood, and then you’re dead.” The U.S. President would have done well to remember his own advice before prematurely claiming “Big progress!” in talks last week with Japan.

The $150 billion in Japanese goods shipped to America last year — a fifth of the country's total exports — may appear to provide ample pressure for a quick deal. But members of Tokyo's negotiating team left Washington without signing a new pact to reduce the 24% levy due to start in July, with the U.S. telling them there can be no special treatment, per Japan's public broadcaster NHK. The delegation is set to return for a second round of talks on Wednesday, but Prime Minister Shigeru Ishiba has made clear he’s in no hurry for an accord.

That is bad news for Trump as his administration scrambles to agree deals with 75 trading partners in about as many days. It adds to the pressure heaped on him by market reactions to his agenda, with stocks, bonds and the dollar all selling off on fears it will cause a recession.

Ishiba told parliament on Monday that his country would not concede to U.S. demands just to get a deal done quickly because "we won’t be able to secure our national interest”. He also voiced “grave concern” over the inconsistency between the separate 25% auto tariffs and a 2019 verbal vow that Japan would not be hit by U.S. car export levies.

That is probably pushing it since the guarantee was absent from the deal Trump and Shinzo Abe signed that year. Yet Japan is right to press on prior commitments and is probably well positioned to play hardball. Goldman Sachs analysts estimate the full 24% tariffs threatened by the White House would knock just 0.2 percentage points off Japan’s annual growth, thanks largely to sticky U.S. demand for capital goods in which Japanese exporters specialise.

Ishiba even sent a friendly letter to President Xi Jinping along with a high-level Japanese delegation to China this week. There's little prospect of Tokyo siding fully with Beijing, but maintenance work on Japan’s second-biggest trading relationship is warranted and a timely reminder to the U.S. that it cannot take economic supremacy in the Pacific for granted.

Japan will surely do its utmost to secure a trade deal before the deadline. But Ishiba’s firm refusal to roll over and his willingness to use Trump's deadline against him has provided a decent template for other countries to make the president sweat, and possibly, in his own words, bleed.

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CONTEXT NEWS

Japan's Prime Minister Shigeru Ishiba said in parliament on April 21 that his country would not keep conceding to U.S. demands in order to reach a trade deal quickly, adding that, “If Japan concedes everything, we won’t be able to secure our national interest”, per Bloomberg. He also voiced “grave concern” over inconsistency with a 2019 promise that Japan would not be hit by American car export levies on security grounds, per Reuters.

U.S. President Donald Trump last week hailed “big progress” in talks between Tokyo and Washington, but negotiations have not removed the threat of blanket U.S. tariffs of 24% slated to take effect in July, nor the 25% tariff on all automotive imports already in effect.

Japan’s lead negotiator plans to visit Washington from April 30 for a second round of talks, NHK reported on Thursday without citing sources. The broadcaster also cited multiple government sources in reporting that American negotiators had told their Japanese counterparts that the U.S. "cannot give special treatment to Japan alone".