Failed Japan deal highlights US trade negotiation challenges
Agencies
The United States failed this week to reach a tariff deal with Japan, a key Pacific Rim ally, and has threatened to notify multiple countries of new duty rates on imports after talks with only one, the United Kingdom, have shown any results.
Those developments, which made the US look weak in the short term, should prompt China to take a harder line with Washington on reaching a deal, analysts said.
China, the world's second-largest economy, was hit especially hard by US President Donald Trump on April 2, which he dubbed 'Liberation Day', when he raised duties on Chinese imports to more than 100 per cent. Citing concerns over US trade deficits, he also imposed double-digit tariffs on imports from many other Asian nations.
Country-specific 'Liberation Day' tariffs were put on hold for 90 days the following week – until July 9 for most countries – pending trade negotiations. Following talks in Switzerland in early May, those on China were also paused for 90 days, until August 12.
Beijing's negotiators would draw strength from the US threat to notify trading partners of new duties and the lack of a US-Japan deal because both showed it was hard for Washington to get what it wanted through talks this summer, said Chen Zhiwu, chair professor of finance at the University of Hong Kong.
'These kinds of threats should embolden the Chinese negotiators because it's a sign of desperation,' Chen said.
Threats of letters that would unilaterally announce recalibrated tariffs on target countries and the lack of a Japan deal meant the US had 'not gained much ground' in negotiations around the world, he added.
On the sidelines of the Group of Seven summit in Canada on Monday, Trump and Japanese Prime Minister Shigeru Ishiba made 'little headway in bridging gaps over tariffs', Kyodo News reported.
Trump told reporters last week that Washington would send other countries letters that establish new US tariff rates despite ongoing negotiations with 17 major trading partners.
The sheer number of tariff deals being sought was 'creating capacity constraints for US trade negotiators' as the 90-day pauses wound down, said Rajiv Biswas, CEO of the Asia-Pacific Economics research group in Singapore.
The UK deal – Trump's first since April 2 – obliges the UK to lower certain non-tariff barriers on US goods and holds out the prospect that British exports of steel and aluminium could be exempted from US tariffs, pending further talks. The UK was exempted from a doubling of US tariffs on steel and aluminium imports to 50 per cent early this month.Analysts have described the UK deal content as thin, with the Brookings think tank calling it 'less a done deal than a first instalment in ongoing negotiations'.
Unilateral changes in US tariff rates would show that the 90-day negotiation periods allowed too little time for deal making, said Jayant Menon, a senior fellow at the ISEAS-Yusof Ishak Institute in Singapore.
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