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International relations

Trump tells Abe trade agreement with Japan possible by May

US makes no demand for auto quotas or currency provisions

U.S. President Donald Trump, right, shakes hands with Japanese Prime Minister Shinzo Abe in the Oval Office at the White House on April 26.   © Reuters

NEW YORK -- U.S. President Donald Trump signaled Friday he is eager to quickly tie up trade talks with Japan, telling Japanese Prime Minister Shinzo Abe that an agreement is possible as soon as May.

Trade talks with Japan could go "fairly quickly, maybe by the time I'm over there -- maybe we sign it over there," Trump told reporters as he sat with Abe in the White House.

At the start of the meeting, Trump said he sought a reduction of tariffs on American farm products.

"We'll be discussing very strongly agriculture because as the prime minister knows, Japan puts very massive tariffs on agriculture ... for many years, going into Japan," Trump said.

"We want to get rid of those tariffs, because we don't tariff their cars," he said.

The U.S. actually imposes a 2.5% tariff on imported Japanese cars, while Japan does not place tariffs on American autos.

"It's been a long time, but I'm sure we'll be able to work that out," Trump said. "And ultimately, we have a chance to make a very good and long-term trade deal with Japan."

Trump will head to Japan as a state guest between May 25 and May 28, meeting the new emperor, and is likely to visit again the following month for the Group of 20 summit in Osaka. Abe said the coronation this coming Wednesday is "about a hundred times bigger" than the Super Bowl, according to Trump.

The two sides said Thursday that tariffs on agricultural products will not be lowered below levels agreed by the 11-nation Trans-Pacific Partnership free trade pact. Under the TPP, Japan's tariffs on beef imports are scheduled to fall from the current 38.5% to 9% over 16 years, and levies on many vegetables and wine are also slated to go down.

Farmers in TPP countries have gained preferential access to Japan because of deals struck with Tokyo after Trump pulled out of the TPP.

Japan's chief trade negotiator, Economic and Fiscal Policy Minister Toshimitsu Motegi, told reporters Friday there had been no demand from the U.S. for automobile quotas or currency provisions.

Tobias Harris, a Japan analyst at Teneo Intelligence in Washington, said there has not yet been enough clarity on what kind of agreement the talks will produce.

"[W]e haven't really heard anything from the Trump administration when it comes to what they would offer Japan in exchange for market access that matches the TPP-11 and the European Union," Harris said. "I have a hard time believing that Abe will want to announce an agreement in principle -- mainly regarding agriculture -- a month or so before upper house elections" in July.

U.S. President Donald Trump and first lady Melania Trump pose with Japanese Prime Minister Shinzo Abe and his wife Akie Abe as they arrive for dinner at the White House on Thursday.   © Reuters

Trade deficit reduction was a key campaign promise by Trump, who seeks reelection in 2020.

But the latest trade figures show that the trade imbalance persists. The U.S. Commerce Department this month reported a $6.67 billion goods trade deficit with Japan for February on a seasonally adjusted census basis. This marked a 24.7% rise from January.

Abe pointed to the president and first lady's May visit and said the two sides will send a message to the world of an "unshakable" bilateral alliance in the new Reiwa era that begins May 1 under Japan's new emperor.

After the meeting, Abe told reporters in Washington that the two sides will speed up ministerial-level negotiations begun in mid-April toward a trade agreement on goods.

"We agreed to accelerate the talks" between Motegi and U.S. Trade Representative Robert Lighthizer, he said.

While the meeting was underway, the White House issued a statement calling the alliance "a cornerstone for peace, stability, and prosperity in the Indo-Pacific region and around the world," while also pointing to an imbalance in trade.

"United States exporters in key sectors -- such as automobiles, agriculture, and services -- have long been challenged by high barriers contributing to large overall trade deficits," it said.

Finance Minister Taro Aso met with U.S. Treasury Secretary Steven Mnuchin on Thursday, but the two sides remain at odds over whether currency policy should also be on the negotiating table for a trade deal.

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