Japan says US won’t hike car tariffs during trade deal talks

TOKYO • Japan is sticking to its view that the US won’t apply higher tariffs on imports of Japanese cars and auto parts so long as negotiations toward a trade deal continue, according to Tokyo’s lead negotiator with Washington.

The comments from Japan Economy Minister Toshimitsu Motegi (picture) come as policymakers in Japan and Europe fret about the findings of a US Commerce Department report on vehicle imports submitted to President Donald Trump on Sunday.

Trump has threatened to raise US tariffs on car and auto part imports as high as 25% if they are deemed a US security risk. Higher tariffs would wallop Japan’s biggest industry, severely denting the country’s growth prospects.

Car and auto part exports made up 20% of Japan’s total exports in 2018.

Motegi said yesterday he had previously confirmed with US Trade Representative Robert Lighthizer that Washington wouldn’t apply higher rates amid talks on a trade deal.

Japan Prime Minister Shinzo Abe had also confirmed with Trump that existing rates would stay put while negotiations took place, he added.

Motegi’s comments echo the response of the European Union (EU) to the submission of the report, reminding the US to keep to its word on holding fire while talks continue.

The EU is readying retaliatory tariffs totalling €20 billion (RM92.75 billion) of US goods should Trump follow through on his threat to impose duties on EU cars and auto parts.

Japan has taken a more cautious view on revealing how it might respond, with no such counter measures unveiled so far.

But policymakers in Tokyo shouldn’t just assume that US-China talks will keep those with Japan on the back burner indefinitely, said Masaki Kuwahara, senior economist at Nomura Securities Co.

While Kuwahara believes the tariffs will ultimately be avoided, he estimates that Japan’s auto export volumes could halve if US tariffs were hiked to 20%, shaving as much as 0.5 percentage point off Japan’s economic growth.

Economists at Daiwa Institute of Research went a step further in characterising the potential fallout of US action. Auto tariffs are “life or death” for Japan, outweighing the USChina trade war as a risk, they said in a report. — Bloomberg