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Trump, Abe Ink Trade Deal as U.S. Withholds Auto Tariffs For Now

Isabel Reynolds and Jordan Fabian
Trump, Abe Ink Trade Deal as U.S. Withholds Auto Tariffs For Now

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President Donald Trump and his Japanese counterpart Shinzo Abe touted a limited trade agreement on Wednesday, as the U.S. withdrew the threat of imposing auto tariffs on the Asian nation for now.

Trump and Abe signed the “first stage” of an initial pact after meeting at the United Nations General Assembly in New York. In an emailed statement, the U.S. Trade Representative’s office described the agreement as covering “early achievements.”

Trump told reporters that he expects “in the fairly near future” that the U.S. will have “final comprehensive deals signed with Japan.”

A sticking point in the more than year-long talks was Abe’s need for a guarantee that Trump will not impose national security tariffs on imported Japanese automobiles and auto parts.

While a joint statement contained only vague written assurances that the U.S. would not introduce such tariffs, Trump doesn’t intend to levy the duties on Japan for the time being, U.S. Trade Representative Robert Lighthizer told reporters.

Trump, who faces re-election next year, was eager to make a deal with Japan to appease U.S. farmers who have been largely shut out of the Chinese market as a result of his trade war with Beijing. American agricultural producers, also reeling from bad weather and low commodity prices, are a core component of Trump’s political base.

Trump, seated next to Abe, told reporters the trade deal between the two countries will help U.S. farmers by opening up Japan’s agricultural market. It will eliminate or reduce tariffs on $7.2 billion of U.S. food and agricultural products, helping U.S. beef, corn, pork and other farmers, the USTR said in a statement.

“These are really big dollars for our farmers and for our ranchers,” Trump said.

The president said the deal, which also covers a $40 billion digital trade agreement, would help reduce a “chronic” U.S. trade deficit. The countries’ goal is for the accord to go into force on Jan. 1, 2020.

Abe said he was pleased with the deal.

“Under this agreement, we together, we’ll be able to bring benefit to everyone in Japan as well in the United States, namely consumers, producers, as well as workers.”

Auto Pledge

Abe’s top priority was to win a pledge that the U.S. won’t slap tariffs on Japanese automobile exports, a sector valued at about $50 billion a year and a cornerstone of the country’s economy. Removing the threat would relieve uncertainty after months of slowing trade and just ahead of an Oct. 1 sales tax hike that poses a fresh risk of dragging down consumer consumption.

The two sides had agreed that no auto tariffs would be imposed during the first rounds of talks and Abe cited the fact that that promise had been kept when asked whether he was confident that Trump would not introduce levies.

“I confirmed clearly with President Trump that the content of the agreement is intended to mean that extra tariffs will not be imposed on Japan’s cars or car parts and President Trump agreed on that,” Abe told reporters.

But other countries have secured more specific written assurances in similar circumstances.

Foreign Minister Toshimitsu Motegi, Tokyo’s point man in the trade talks, said he had also confirmed with Lighthizer that no quotas or voluntary restraints would be imposed on Japan’s auto sector, either. In the longer term, the U.S. agreed to remove existing tariffs on the sector, according to a statement issued by the Japanese government. No time line was given for this.

Why Tokyo Is Trembling Over Trump’s Auto Tariff Threat: 6 Charts

The proposed pact won’t lower the barriers protecting Japan’s rice farmers -- a powerful group supporting Abe’s ruling Liberal Democratic Party. This could help the prime minster smooth the deal’s course through parliament, where it must be ratified before coming into effect.

U.S. Senator Ron Weyden, the ranking member on the Finance Committee, criticized the narrow scope of the deal. “The agriculture deal is not a comprehensive one and there is much more to do to level the playing field in Japan for American workers, businesses, farmers and ranchers.”

Senator Chuck Grassley, who chairs the committee, told reporters Wednesday that he’s happy with the deal, but added, “I think the negotiations ought to be more comprehensive than just for agriculture.”

Trump has said this limited deal would not require a vote by Congress.

(Updates with comments from Abe.)

--With assistance from Jenny Leonard, Shawn Donnan, Laura Davison and Jon Herskovitz.

To contact the reporters on this story: Isabel Reynolds in Tokyo at ireynolds1@bloomberg.net;Jordan Fabian in Washington at jfabian6@bloomberg.net

To contact the editors responsible for this story: Brendan Scott at bscott66@bloomberg.net, Sarah McGregor, Robert Jameson

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