It looks like the U.S. is close to a pretty good trade agreement with Japan. We hope so, but it isn't yet a done deal.
The outline of the agreement, as presented on the sidelines of the G-7 summit late last month in France, was that the U.S. would enjoy lower tariffs on agricultural products sent to Japan and in exchange drop the threat of crippling tariffs on auto imports.
But it's not quite that simple.
President Donald Trump quickly clarified that holding off on auto tariffs was only a "for now" kind of concession — he didn't rule out later imposing tariffs on the basis of a threat to national security or any other reason. So Japan would be getting almost nothing — a temporary and nonguaranteed reprieve — in exchange for giving U.S. farmers the benefit of Trans-Pacific Partnership-like tariff cuts.
The thing about trade deals — like trade itself — is that both sides have to give something.
The agreement in principle, to many in Japan, isn't such a deal. Even if Japanese Prime Minister Shinzo Abe were inclined to take Trump's offer, he may face resistance by Japan's legislature, the Diet.
Maybe the final agreement will include a few more wins for Japan so Abe can credibly call it "bilateral." It may take more than guarantees that the U.S. won't later impose steep tariffs or import quotas, but that's a good place to start.
Let's be frank: This president — and this industry — could use a win on the trade front as we roll into the 2020 model year. We're in a trade war with China, the president is threatening to tax French wine while in France and Democrats in Congress aren't eager to sign on to the new agreement with Canada and Mexico.
The U.S. and Japan are very close allies, economically and militarily, and it's nice to see their leaders acting like it. Will they get the trade deal from "fairly close" to "done"? We shall see.