US President Trump has escalated trade tensions with Japan, threatening them with additional tariffs of up to 35%. His statements signal a stalemate in ongoing trade negotiations, which could raise fears of a new trade war with an important ally.
Trump’s Tariff Threats and Deadline
President Trump warned that if countries fail to secure trade deals by July 9, it will face new tariffs. President Trump expressed doubt about reaching an agreement with Japan, now saying they could face tariffs of 30-35% if no deal is secured. He cited the United States’ trade deficit with Japan as an important issue. ⁽¹⁾
On Liberation Day, Trump launched a global trade war by imposing tariffs on many countries, with a 24% tariff on Japanese imports. He later reduced this to 10% for 90 days, allowing time for negotiations.
With this pause set to finish, Trump has ruled out extending the deadline. His administration has also hinted at potentially barring some nations from trading with the US entirely.
US-Japan Trade Negotiations
Negotiations between US and Japanese officials have been ongoing since Liberation Day but have now reached a stalemate. Japan currently faces a 10% tariff on most exports to the US, with higher levies of 25% on cars and car parts, and 50% on steel and aluminum.
Japan has pressed for relief from Trump’s 25% auto tariffs, saying they are crippling a crucial industry. But the US President rejected the request, saying Japan does not import a significant number of American-made vehicles.
Trump has also criticized Japan’s control of its rice industry, with Trump claiming Japan refuses to import American rice despite a shortage. ⁽²⁾
This is not the first time the Trump administration has singled out Japan’s protection of its rice industry as unfair. In March, White House Press Secretary Karoline Leavitt accused Japan of setting tariffs on rice at 700%, a claim the Japanese government has said is inaccurate. ⁽³⁾
Japan’s Rice Crisis and Challenges
The rice supply shortage that President Trump cited has frustrated Japanese consumers already unhappy about an ongoing cost-of-living crunch. Rice prices have doubled in the last year, prompting Prime Minister Shigeru Ishiba’s government to release emergency reserves into the market. ⁽⁴⁾
Expanding imports of American rice might help ease the imbalance in the market, but that move would increase angst in the domestic farming sector, especially if their interests are seen to be sacrificed to secure lower tariffs for the car industry. ⁽⁵⁾
Ishiba may want to hold off making any concessions that affect that segment of the population ahead of an upper house election on July 20. Japan’s Chief Cabinet Secretary Yoshimasa Hayashi said the country would not sacrifice its farmers to secure tariff relief from the US. ⁽⁶⁾
Market Reaction and Broader Implications
The Japanese Yen pulled back against the US Dollar from over three-week highs after US President Trump threatened to impose a 35% tariff on Japanese imports in a bid to pressure Tokyo into making trade concessions. The Nikkei 225 recovered slightly after a 3.3% decline.
Japan is one of the most significant US trading partners, putting it in a category of economies that Trump administration officials has said are in line for deals, rather than imposed rates.
Progress on Trade Talks
US Commerce Secretary Howard Lutnick said last week that the administration would finalize a slate of trade deals with roughly 10 of the “top” US partners, while others would receive letters setting duty levels.
Trump for weeks has sought to exert leverage with negotiating partners ahead of the deadline, vowing to cut short talks with those he sees as being difficult and instead send them letters setting tariff rates.
The president paused his tariff plan in April to allow time for negotiations. Since then, he and his team have repeatedly pledged that a slate of deals were weeks away. But to date, the only two agreements announced have been broad frameworks with China and the UK. ⁽⁷⁾
