Weekend Edition: Japan works through its unwritten trade deal
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How have recent US‑Japan tariff changes affected Japan’s export outlook?
Japan's economy is heavily dependent on exports. Of course, they account for 18% of GDP and cars, obviously a significant part of that. So when President Trump announced a 30% tariff on Japanese cars, you can imagine the consternation that caused. But those tariffs have come down now, so will Japan weather the storm? Can it grow as an economy with these tariffs in place? And is Japan still an opportunity? Opportunity for investors. That's this week. The morning call from NAB with Phil Dobby.
The weekend edition.
Well, the US imported one hundred and forty eight billion dollars worth of goods from Japan in twenty twenty four. Sales were helped, of course, by a stronger dollar buying more yen, so cheaper Japanese goods. And you can see why President Trump had been getting upset because the US was selling about half the amount Japan was shipping to them. So a big balance of trade deficit for America and a healthy surplus for Japan, which is why the US President felt he could slam a twenty four. percent tariff on Japanese goods on his initial Liberation Day tariffs on April the second, using his magic formula, which was basically the ratio of the trade deficit to total exports. There was also a twenty five percent tariff on autos.
That was then. What now? Well, President Trump says he has this fantastic deal with Japan. Tariffs have dropped to fifteen percent, cars included, so better than it was. But surely n still not that great for Japan. So what does it mean for Japan? Well, here's Harry Ishahara, uh, an independent macro strategist based in Tokyo. We've spoken to before on the podcast. So is this all bad news or could it in some ways be seen as strengthening that relationship between the United States and Japan in some areas perhaps?
So the uh the trade deal with the US was obviously top, top news here. Um initially um Because some of the uncertainty went away, um, myself and some other colleagues, we thought that it would be good, um, politically speaking, but um it turned out to be kind of mixed. Uh the uncertainty went away, which was good for the stock market. Um, led by all the makers it surged. They were expecting um a worse case, but it came down to fifteen percent for them. And so they had a big rally. In fact, there were a lot of surprises on this on this trip for um Minister Bazawa. He uh apparently the um meeting with President Trump was not expected. Um and I think um getting invited to um Secretary Lutnik's house um for a crash course on how to negotiate with President Trump.
That was probably unexpected as well. Um and then getting a deal was probably unexpected as well. So there were there were a couple of surprises from this trip. And um so he came back and um I think he tweeted uh mission accomplished. Uh very proud of it. But um as it turned out, so there was nothing written down um later on and in interviews and stuff, Minister Kazawa and the trade delegation, they said, um, well, we couldn't write get the writ uh the details written down because President Trump is so impatient, as you know. So if we tried to bog him down with details, he would just blow up. So that's why um they made it sound like they did that on purpose. Um but uh But does
that make it dangerous, that certainty that you're talking about, if you've got nothing in writing? Because I mean that's clear. Because I'm hearing stories that actually that fifteen percent on autos is actually being stacked in some cases on the on on the uh on the fifteen percent tariff which is across the board.
What did the new unwritten trade deal actually reduce the tariff rate to?
So actually, you know, you're back to uh auto tariffs close to to where they were. Now m that might be just an administrative hiccup while they get it all in place. But is i i is there any truth in that story?
Um yeah, there was a hiccup. Um that was big news as well. Um they agreed to fifty percent. But it I was actually fifteen percent An additional fifteen percent, I think that was the headline. And then um Japanese officials went over again and they hashed it out and it turned out that it was a mistake. On the US side.
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Chapters
8 chapters
1
How have recent US‑Japan tariff changes affected Japan’s export outlook?
0:01–3:38
2
What did the new unwritten trade deal actually reduce the tariff rate to?
3:38–7:08
3
Why is the $550 billion investment package considered a “loan‑vs‑equity” debate?
7:08–10:21
4
How are Japanese companies adjusting supply chains and M&A activity to cope with tariffs?
10:21–14:05
5
What impact do the tariff‑related profit cushions have on Japan’s GDP and BOJ policy?
14:05–17:29
6
Is Japan’s current inflation level prompting a rate‑hike or a hold by the BOJ?
17:29–20:17
7
What does the 60‑40 profit‑share split mean for investors in the $550 billion fund?
20:17–23:52
8
Is now a good time for investors to consider Japanese equities and M&A opportunities?
23:52–26:01