President Donald Trump has promised Americans that he will renegotiate long-standing pacts with major U.S. trade partners to get better deals for America.
As he meets with Japanese Prime Minister Shinzo Abe, U.S. producers of nearly $300 billion worth of goods and services sold to Japan are eagerly waiting to find out what that new trade horizon might look like.
No matter what terms the Trump administration manages to negotiate with Japan, it will cover a complex list of hundreds of separate products and industries, from aircraft to medical equipment to corn.
That’s why any new trade deal will have a major impact on U.S. exporters.
Japan is America’s fourth-largest trade partner. Last year, the U.S. imported some $132 billion worth of goods from Japan, more than twice as much as the U.S. exported to Japan.
Trump has taken a tough stance on trade relations, accusing China and Japan of manipulating their currencies to create an unfair advantage when competing against U.S. exporters.
He repeated the complaint last month in a meeting at the White House with pharmaceutical executives.
“Every other country lives on devaluation,” Trump said. “You look at what China’s doing, you look at what Japan has done over the years. … They play the money market, they play the devaluation market and we sit there like a bunch of dummies.”
But Abe has insisted that Japan hasn’t devalued its currency to boost exports.
“The criticism that our policies are intended to direct the yen lower is undeserved,” Abe told Japanese lawmakers earlier this month.
The drop in the value of the yen has been spurred in part by the Japanese government’s three-pronged strategy to boost its weak economy. Abe’s so-called three arrows policy includes unprecedented monetary easing, massive federal spending and regulatory reforms designed to spur new investment.
So far, Abe’s arrows have largely missed their target.
The prime minister also was hoping to spur Japan’s moribund economy with the Trans-Pacific Partnership, now a defunct trade pact. Negotiated by the Obama administration, it failed to win support in Congress last year.
Trump has called the 12-country trade deal “a rape of our country” and the “worst danger yet,” a sentiment shared by a large number of congressional Republicans.
The failure of TPP leaves many U.S. exporters uncertain about whether elements of the deal will be revived in bilateral agreements with the TPP countries.
In the meantime, China and 15 other Asian countries are moving ahead with a separate trade deal, the Regional Comprehensive Economic Partnership, which includes a larger volume of regional trade. If enacted, the agreement would create an economic bloc with a combined population of 3.4 billion and trade volume of $10.6 billion, accounting for nearly 30 percent of the world’s trade, according to South Korea’s Trade Ministry.
The U.S. is not part of RCEP, which could leave many U.S. exporters at a disadvantage when competing against Asian exporters in the region.
West Coast states, which rely most heavily on Asian markets, could be especially vulnerable.