UPDATE: Oct. 8, 2019: The U.S. and Japan signed an initial trade deal related to agricultural products on Oct. 7.
"Once this agreement enters into force, Japanese tariffs will be completely eliminated ... and substantially reduced over 90% of the United States agricultural exports," Trump said at the signing.
Dive Brief:
-
An agreement signed Sept. 25 by President Donald Trump and Japanese Prime Minister Shinzo Abe could open Japanese markets to U.S. agricultural commodities such as beef, pork and wheat, and cut U.S. tariffs on Japanese green tea and industrial goods such as turbines, machine tools and bicycles, The New York Times reported.
-
Trump said the deal will help reduce the chronic U.S. trade deficit with Japan, which reached $67 billion last year, The Wall Street Journal said. At a Sept. 25 news conference with Abe, he said Japan will open its markets to $7 billion worth of U.S. agricultural goods and lower or eliminate tariffs on items including beef, pork, wheat, cheese, corn and wine.
-
According to The Journal, the agreement was purposely limited in scope in order to avoid a Congressional vote on it. A more detailed formal agreement is expected to be signed in early October, Reuters said.
Dive Insight:
A tentative agreement between the U.S. and Japan was reached in August, but disagreement over tariffs on Japanese autos delayed it until now, USA Today reported. Although that element is still not resolved, sufficient progress was made on agricultural exports to potentially assist U.S. farmers who lost market share after Trump withdrew the U.S. from the Trans-Pacific Partnership in January 2017.
The 11 remaining TPP signatories — including major U.S. trading partners such as Canada, Mexico and Australia — subsequently moved ahead with trade arrangements, leaving the U.S. to look on from the sidelines. This limited agreement with Japan could bring some U.S. commodities back on par with goods from those countries.
Under the tentative agreement signed this week, Japan would cut tariffs on U.S. beef and pork exports to near the same level as the 11 TPP countries. The U.S. would get rid of a 200-ton low-tariff quota on Japanese beef — putting that country on the same level as Canada, Australia and New Zealand. Other beneficiaries would be U.S. wheat, dairy products and wine.
Farm and ranch groups in Montana praised the agreement, since Japan is the largest foreign buyer of the state's wheat and the biggest purchaser of U.S. beef, according to the Billings Gazette.
"It’s just been such a rollercoaster for a year and a half. We just need to see the U.S. finish a deal," Lola Raska, executive vice president of the Montana Grain Growers Association, told the newspaper.
This agreement would help beef and pork producers because it lowers tariffs from 38.5% to 27.6% beginning in January and gradually steps them down to 9% by 2033, the Gazette reported. Japanese tariffs would be completely lifted on almonds, blueberries and broccoli, CNBC said.
Farmers for Free Trade, a coalition of ag commodity associations, called the agreement "a step in the right direction." But it also expressed concern over the U.S.'s continuing trade dispute with China.
"Our farmers need trade wins, not trade wars," the group said in a statement. "We hope this new agreement leads to more wins, as well as progress in achieving a better trade relationship with China."
California's Wine Institute was particularly pleased about the agreement because it would phase out the 15% tariff on bottled wine by 2025. President and CEO Robert Koch said in a release the U.S. has been the only major wine-producing country paying it.
Once further details of the agreement are known and a final agreement signed, Trump could benefit by being viewed more positively in farm country, which has suffered from the impacts of his trade disputes.
Agriculture Secretary Sonny Perdue recently called the president the "best advocate" for the sector and suggested the industry get behind his trade approaches — such as the United States-Mexico-Canada Agreement to replace the North American Free Trade Agreement — and lobby Congress for their passage.
It's possible this tentative deal and the perception of progress could start to alleviate losses and move things forward for U.S. commodity producers and food manufacturers, but the Chinese tariff situation remains a thorn in their side. However, according to CNN, recent tariff exemptions and delays from both sides may signal detente in that trade war as well.