Vietnam steals a march and leaves Japan in a tough spot on U.S. tariffs

Japan Times

5 hours ago

A tariff deal negotiated between the United States and Vietnam has set a high bar for Japan, which has made no concrete progress over 11 weeks of intense trade talks with Washington and has earned itself the ire of U.S. President Donald Trump in the process.
'Even after a round of negotiations like this, it's clear that some tariffs will remain,' said Akihiko Yasui, research director at Mizuho Research and Technologies, in discussing the Vietnam deal. 'And more importantly, it was the higher-rate tariffs that were in fact on the table.'
In a Truth Social post on Wednesday, Trump said a 20% tariff will be imposed on Vietnamese exports to the U.S., lower than the original 46% "reciprocal" tariff announced on April 4. Goods transshipped to the U.S. via Vietnam will be subject to a 40% levy.
American exports to Vietnam will be allowed to enter the country duty-free.
'It will be a great deal of cooperation between our two countries,' Trump wrote.
Japan has all along insisted that tariffs introduced by the Trump administration be rolled back as a precondition to a deal. The U.S. has countered that the only subject up for negotiation is the reciprocal tariffs, now at 10% but set to rise to 24% for Japan on July 9.
The Vietnam deal confirmed that the U.S. stance hasn't changed and that a wide gap remains between the positions of Japan, which has yet to make any major concessions, and the U.S., which is demanding big concessions in exchange for a lowering of the higher reciprocal rate.
'In Japan's case, there's very little that the U.S. can point to and say, 'We won this.' That makes the situation quite difficult for Japan,' said Yasui. 'Japan doesn't have much to concede, and even what we could get in return doesn't strike at the core of our interests.'
The United States has reported two other trade deals, one with the United Kingdom and the other with China, but they were quite unique and of limited value in gauging the stance U.S. negotiators would take with other countries.
The U.K. runs a trade deficit with the U.S., while the China deal involved a number of special considerations, not the least of which is the country's lock on certain rare earths.
Vietnam's position is closer to that of many other countries still in talks with the U.S., including Japan. It has a huge trade surplus with the U.S., has been accused of using nontariff barriers and has no ace to play in negotiations.
Trade officials in the United States remain optimistic but guarded and vague when discussing talks with Japan. In a CNBC interview on Wednesday, U.S. Deputy Treasury Secretary Michael Faulkender said that the U.S. anticipates making announcements on the negotiations with some other countries before the July 9 deadline.
'Japan is among those that we have had a number of conversations,' Faulkender said. 'We continue to make good progress with them and hope to have an announcement shortly on the progress that we have made.'
He also said that if countries move to address nontariff barriers, that could 'change the calculus for us on where our tariff barrier ends up.'
Trump himself has been signaling more of a hard line. He personally slammed Japan for three days running this week, saying that it's "spoiled" and complaining about its unwillingness to accept U.S. vehicles and rice.
On Tuesday, he said that tariffs on Japanese imports could be taken as high as 35%.
The United States might demand a cap on the number of Japanese vehicles exported to the United States if no deal can be reached soon, according to a Wall Street Journal article on Wednesday.
Japan has remained silent regarding Trump's verbal onslaught and has stuck to its talking points. On Tuesday, Prime Minister Shigeru Ishiba reiterated in three different settings that Japan sees investment in the United States as the best way to address its trade surplus with the country.
The Trump administration has placed an additional 25% tariff on vehicles and auto parts and a 50% tariff on steel and aluminum, and the 10% baseline reciprocal tariff on most other goods.
The ball is in Japan's court now, Yasui said.
But the U.S. demands require Japan to make concessions that are nearly politically impossible.
'Trump has been dropping hints — about rice, for example. But if Japan's position is, 'We have elections, we can't touch rice,' or 'We can't use agriculture to save auto exports,' then that basically means we're out of ammo,' Yasui said.
'This really is a political judgment,' he went on. 'It is not that Japan can't do anything. The issue is whether Japan chooses to make such decisions or prepares itself for a long-term standoff.'