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International relations

Auto tariffs to dominate new US-Japan trade talks

'Free, fair and reciprocal' negotiations expected in late July

Washington's proposed auto tariffs cloud preparations for trade talks between U.S. Trade Representative Robert Lighthizer, left, and Toshimitsu Motegi, Japan's fiscal policy minister.   © Reuters

TOKYO -- The U.S. and Japan expect to hold cabinet-level trade talks in Washington as soon as the end of July, even as Tokyo struggles to read the White House's stance with President Donald Trump threatening higher auto tariffs before the meeting.

U.S. Trade Representative Robert Lighthizer and Toshimitsu Motegi, Japan's economic and fiscal policy minister, will discuss "free, fair and reciprocal" trade. Preparations have been thin, however, since the USTR is preoccupied with renegotiating the North American Free Trade Agreement. Negotiations for Japan will be led by the office in charge of the Trans-Pacific Partnership talks, as well as the ministries for foreign affairs, trade and finance.

Higher auto tariffs represent the largest variable, as the U.S. considers imposing them in the name of national security under Section 232 of the Trade Expansion Act of 1962. A proposal to add a 20% tariff on imported vehicles could do immeasurable damage to Japanese automakers.

It remains unclear whether the results of the Section 232 investigation will be released before the trade talks. But some inside Japan's government worry that negotiations may be aborted if tariffs are announced beforehand.

Lighthizer likely will renew a request for a Japan-U.S. free trade agreement. Tokyo aims to put the 11-nation Trans-Pacific Partnership into effect this year, creating a bargaining chip by lowering tariffs on agricultural products from participating countries. Trump withdrew the U.S. from the trade pact, and prospects for it to return are low.

Tokyo also will refuse to grant agricultural tariffs lower than those agreed to in the TPP should Washington propose negotiations for a bilateral trade deal. Talks may drag out if the U.S. makes even harsher demands.

Japan thinks it can minimize damage if Washington asks to make a deal before the U.S. midterm elections in November, whether for auto tariffs or a trade agreement. Tokyo also has expressed interest in cooperating on infrastructure projects in the U.S. and opening up markets in other countries. Japan may contain the impact on the country's manufacturing and agricultural industries should it agree to import more U.S. products like defense equipment.

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