Japan Grapples with U.S. Trade Threats Amidst Election Campaign

A letter from U.S. President Donald Trump to Prime Minister Shigeru Ishiba, released on July 7, highlighted the challenges Japan faces in securing a trade deal with the United States before a new deadline set by Trump. The ongoing Upper House election campaign further complicates the situation.

Prime Minister Ishiba responded to Trump's letter, which threatened new tariffs, on July 8. He stated that progress had been made in negotiations, effectively maintaining the existing tariff rate and extending the talks' deadline. Trump's letter, shared on social media, indicated a potential 25 percent tariff on Japanese goods starting August 1, a slight increase from the previously announced rate.

Japan had been negotiating with the United States to review new tariffs, with the initial "Liberation Day" tariff paused for 90 days until July 9. Ryosei Akazawa, representing Japan in the tariff negotiations, emphasized the government's commitment to combating the tariffs, stating that an agreement had not been reached due to Japan's stance on protecting national interests.

Akazawa and U.S. Commerce Secretary Howard Lutnick agreed to continue negotiations. A senior ministry official indicated that the government would analyze the U.S.'s concerns regarding Japan's proposals. However, it appears difficult to offer additional incentives before the Upper House election on July 20.

A government official also noted that Prime Minister Ishiba would have limited ability to demonstrate leadership in the ten days leading up to the new August 1 deadline. Japan's priority is reviewing a potential 25 percent tariff on automobiles, which constitute a significant portion of its exports to the United States. Japan proposed a mechanism to lower the tariff rate based on its contribution to the U.S. auto industry.

Initially, government officials hoped for a trade deal agreement in mid-June. However, Prime Minister Ishiba did not secure an agreement after meeting with the U.S. president at a Group of Seven summit. Ishiba had hoped to impress voters during the Upper House election campaign if tariff negotiations had concluded earlier.

Opinion polls suggest that the ruling coalition could lose its majority in the election. Trump's letter could further impact the coalition, which had already lost its majority in a previous election. Ishiba has used the tariff negotiations to garner support from opposition parties. However, his ability to resolve the negotiations is now being questioned.

Yoshihiko Noda, the president of the main opposition party, urged Ishiba to engage directly with Trump, questioning his leadership and the pace of negotiations. Noda, a former prime minister, referenced his earlier decision not to submit a no-confidence motion, expecting thorough negotiations during a national crisis.