Japan, US agree on trade talks New framework designed to allow parties to save face

NEW YORK — US President Donald Trump and Japanese Prime Minister Shinzo Abe agreed on Wednesday to start trade talks in an arrangement that, for now, protects Japanese automakers from further tariffs, seen as a major threat to the export-dependent economy.

The two countries said in a statement the talks “will respect positions of the other government”, drawing lines on autos and Japan’s agriculture sector.

Trump has made clear he is unhappy with Japan’s $69 billion trade surplus with the United States — nearly two-thirds of it from auto exports — and wants a twoway agreement to address it.

Tokyo pushed back on a straight bilateral Free Trade Agreement that Washington had sought. The latest framework appeared designed to allow both parties to save face: Abe avoids the worst-case scenario of an imminent 25 percent tariff on cars, while Trump claims victory for getting Japan to a two-way negotiating table.

“This was something that, for various reasons over the years, Japan was unwilling to do and now they are willing to do,” Trump said at a summit with Abe in New York on the sidelines of the UN General Assembly.

“We’re going to have a really great relationship, better than ever before on trade,” he said.

Wednesday’s statement said a deal governing the auto sector would be written to boost production and jobs in the US.

Tokyo had worried that Trump could demand a reduction in auto imports from Japan or that he could impose steep tariffs on such imports on national security grounds.

While economists saw the agreement as a positive outcome for Japan for now, they noted what would ultimately be agreed upon was still unknown.

“If you just look at what was agreed this time, Japan did extremely well,” said Junichi Sugawara, senior research officer at Mizuho Research Institute.

“But at the end of the day, this is just the entry-way into any final agreement and we have to remember that there is a possibility that (Japan) could be hurt very badly in the end,” he said.

Shares of Subaru Corp and Mazda Motor Corp, two of the most export-reliant Japanese automakers, rose 3 percent and 1.2 percent respectively, outperforming a slightly weaker Tokyo market.

Giants’ warnings

Meanwhile, in the US, from Ford to Walmart to Procter & Gamble, an increasing number of iconic companies are warning that Trump’s tariffs on US imports are raising their costs and prices.

Jim Hackett, CEO of Ford, the second-largest US-based automaker, said on Wednesday that Trump’s taxes on imported steel and aluminum are costing Ford $1 billion and threatening to ignite price increases across the auto industry.

Likewise, Walmart, the country’s largest retailer, has told the government that Trump’s latest round of taxes on $200 billion of Chinese imports could increase prices for its shoppers. Walmart specifically mentioned items ranging from car seats, cribs and backpacks to hats, pet products and bicycles.

Procter & Gamble, the consumer products giant, has warned of both potential price increases and job losses as a result of the tariffs.

In the meantime, drinking Coca-Cola is costing more because of Trump’s tariffs. Macy’s, too, has warned of likely price increases. So has Gap.

On Wednesday, Federal Reserve Chairman Jerome Powell took on the issue at a news conference after the Fed announced its latest interest rate hike. Asked about the Trump tariffs forcing up prices for America’s consumers, Powell agreed that Fed officials are hearing from businesses about forthcoming higher costs.

“You don’t see it yet,” the chairman said, referring to the data the Fed studies.

But, Powell acknowledged: “The tariffs might provide a basis for companies to raise prices in a world where they’ve been very reluctant to and unable to raise prices.”