Japan, US reach deal on reduced 15% auto, 'reciprocal' tariffs
Ideas
The Japanese trade delegation have to be congratulated for their effort to reduce the tariff to 15 percent after all of the Trump rhetoric about higher tariffs.
The 15 percent tariff is much better than the 25 percent tariff that was the intention of the US admin. But the problem Japan had to maybe offer 500 billion in investments in the US to get the tariff rate from 25 to 15 percent.
Yes, it was very good that Japan a major importer of Japanese goods to the US was able to achieve it did and actually might have had to best outcome of all countries in the tariff negotiations.
The rice situation might not be considered a negative for Japan is Japan has an-ongoing rice shortage situation so the idea of importing foreign rice might have always been in the works.
The challenge is of course getting Japanese consumers to like foreign rice when many Japanese prefer Japanese rice only. But if Japanese companies use the foreign rice to make other rice products then most likely it won't be a major problem.
The Japanese agriculture sector is one of the most protected sectors in the world and there was probably no way there was going to be any change in that sector in the tariff negotiations.
You have to take it with a grain of salt that the US will receive 90 percent of the 550 billion in investments by Japan into the US in the future.
And we need to take it with a grain of salt the hundreds of thousands of jobs will be created in the US due to investments by Japan into the US.
What Trump doesn't understand or doesn't want to know is trade is not a competition between countries but more of a cooperation among countries to import and export products for the good of both countries and both countries are better off with trade.
There is a very simple reason why Japan doesn't import US cars into Japan in that US cars just don't sell in Japan. For the most part, first Japan has eight car companies to choose from and the second part is most US cars are just too big for Japanese roads and streets as many Japanese cars are much smaller that US made cars.
European cars are much better for the Japanese streets and roads and there is a significant number of them in Japan but again they are still a small percentage compared to the number of Japanese cars in Japan.
Citing national security concerns might just be a reason to increase tariffs as they might be trying to protect US jobs.
But the problem is US consumers have a lot of choices now than just the 3 US car manufactures and US consumers are not going back as now they want and always want more choices than just US cars.
The problem with importing Japanese cars made in the US is cars made in the US are for the US market and engineered to US road and safety specification which might fit Japanese market and government specifications.
So that means Japanese car makers in the US would have to re-fit their assembly lines which could be very expensive for them.
And then there is the idea, which is not mentioned here that much is Japanese consumers just don't want US cars as for the most part, they are too big for Japanese style roads and the quality is perceive to be less than Japanese cars.
Japanese negotiators seemed mostly concerned with the Japanese car industry which is a major economic driver of the Japanese economy and and loss of sales and revenue would significantly affect the Japanese economy.
All other areas while important probably took a back seat to the real negotiations related to the car industry.
Again, not to say the other sectors or exports to the US are not important but Japan had to prioritize what was/is the most important sectors for the good of the Japanese economy.
Most likely, the tariff negotiations were just a starting point for other trade negotiations which was/is the real intention and not the tariffs.
For example if the US hadn't come up with tariff rate in the first place Japan and other countries for example might not thought of other strategies or angles to help them such a as the liquefied natural gas deal.
Again the tariff situation all along might not have been the real intention as they US wanted foreign investments such as the 550 billion investments related from Japanese companies.
The US probably knows it is now going to get all of the US manufacturing companies to come back to the US as the expenses might just be too much. So the other option was/is to get foreign companies to invest in the US and of course provide more jobs in the US economy.
Yes, it was/is a very good strategy by Japan to focus on investments as Japan might have known tariffs were not the real reason for countries exporting to the US but the intention all along was/is foreign investments in the US.
The signing of the agreement on investments might take some time to finalize as most likely both sides might want or want to change some parts of the agreement.
All countries today are interconnected and what happens in one country can have an affect on another country as supply lines are just too blurred these days.
Back in the day, it seemed countries were aware that what happen in one country can affect other countries as there was always a sense of fair play and trade was not a zero sum game but beneficial to and for everyone.
But it seems, at least for the current US admin, they only think what's good for them and not what's good for everyone in the long run.
The agriculture sector has been and most likely will always be protected in Japan as agriculture is the heart of most economies around the world.
And yes, the auto sector is the backbone of the Japanese economy and will always take priority in any negotiations with foreign countries.
The problem with Japan is that it really doesn't have any other sectors that can improve economic growth like the auto sector can.
Its a whole new world out there and international trade is never going to be the same after everything is done and finished if ever will be.
But then again, things could drastically change in four years as maybe an new US administration might come in and change everything again.
The US has always had a trade imbalance due to the nature of the US economy as a major consumer driven economy which means all countries want to sell their products in the US.
The US economy always has a trade deficit and always will as imports are more important than exports in the US.
Its a very common fact that US cars just don't sell in Japan and will never sell in Japan due to Japanese consume preference.US cars, for the most part, are not made for the Japanese roads and streets which are just too narrow and would not fit in Japanese roads.
And related to US agricultural products, again, the Japanese agricultural market is one of those protected markets in the world and it most likely will always be that way.
Again, its so simple to understand as the US economy has a trade deficit due to the fact that most countries want to sell their products in the US which is a major, if not the largest, consumer driven economy in the world.
The US is trying to have it its way only without thinking of what's best for the global economy or the long term.
The thing is, each country has a choice and the global economy is becoming a consumer driven economy with the global middle class getting bigger everyday which means consumers in other countries want and need new products, which eventually mean some companies in some countries might decide the US is not just worth it was there are other market globally that we can sell our products in now.
But it might take some time but that it could happen eventually as if the US is not interested in the global economy and what's good for everyone and other countries and other companies might just say its no longer worth it to sell in the US.
Have a nice day!
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.