Japan Ties Auto Tariffs To US Trade Talks As Q1 Economic Contraction Looms

Japan has reportedly clarified its stance on the bilateral trade talks with the United States, ruling out any pact that does not include an accord on autos.

Bloomberg reported that Prime Minister Shigeru Ishiba confirmed this in a Parliamentary session on Monday. The prime minister also said he would not sacrifice the agriculture sector to protect autos.

Japan’s top trade negotiator, Ryosei Akazawa, seconded this view in his address to the Diet and said the country will continue to seek a reprieve from all the tariff measures imposed by the Trump administration. 

After announcing a 24% tariff on Japanese imports in early April as part of President Donald Trump’s Liberation Day levies, the U.S. has paused implementation to allow scope for negotiations. Currently, a 10% base levy and a 25% tariff on cars, steel, and aluminum are in place.

Akazawa had previously said the trade negotiations between the U.S. and Japan will accelerate later this month, with a deal likely in June.

The Bloomberg report, citing Japanese public broadcaster NHK, said an agreement will be reached in early July, around the time Japan announces a national election.

The report suggested that Japan offered to expand auto-related investment in the U.S. and enhance shipbuilding cooperation to reach a compromise. 

According to World Bank data, Japan is predominantly an export-dependent economy, with exports accounting for 21.8% of the 2023 GDP. Japan’s auto exports are valued at 20 trillion yen, accounting for 20% of the nation’s overall exports.  About 30% of auto exports are shipped to the U.S.

A separate Bloomberg report said Japan’s economy may have shrunk in the first quarter, even before the U.S. announced reciprocal tariffs. Economists polled by the media outlet opined that Japan’s first-quarter real GDP may have declined by 0.3% on an annualized basis, marking the first drop in a year.

Japan is due to announce its preliminary first-quarter GDP data on Friday.

Meanwhile, China has reached a preliminary trade deal with the U.S. following two days of bilateral negotiations. 

The Invesco QQQ Trust (QQQ) ETF is down 4.41% this year, the SPDR S&P 500 ETF (SPY) has lost 3.4%, and the iShares MSCI Japan ETF (EWJ) has gained 7.3%.

For updates and corrections, email newsroom[at]stocktwits[dot]com.