The Fragile Alliance

A Fundamental Gap Opens in Tariff Negotiations


By Takuya Nishimura, APP Senior Fellow, Former Editorial Writer for The Hokkaido Shimbun. The views expressed by the author are his own and are not associated with The Hokkaido Shimbun
You can find his blog, J Update here.
May 5, 2025. Special to Asia Policy Point

As tariff talks between the United States and Japan are getting into details, a fundamental difference over preconditions has emerged that put the talks in danger. While the U.S. says that cars, steel, and aluminum tariffs are nonnegotiable, Japan insists on negotiating tariffs on every product from Japan. This disagreement places unusual pressure on both governments due to internal political calendars.

Following the first meeting on April 16, Japan’s top negotiator, Ryosei Akazawa, held a second meeting with his counterparts, U.S. Secretary of Treasury Scott Bessent, Secretary of Commerce Howard Lutnick and U.S. Trade Representative Jamieson Greer, in Washington, DC on May 1.

After the meeting, Akazawa announced that both sides had discussed expanding trade between the two countries, reducing non-tariff barriers, and cooperating on economic security. Japan asked the U.S. to reconsider its tariff policy on all products.

According to some news reports, Japan explained in the meeting how it would increase imports of corn and soybeans from the U.S. and ease regulations that generally prevent the importation of foreign-made cars. Bessent said that he hoped to reach a consensus with Japan across a range of key bilateral issues soon.

However, even before Akazawa returned to Japan, Japanese news media reported that the U.S. would exclude cars, steel, and aluminum from the negotiations. The Trump administration had already activated 25 percent tariffs on steel and aluminum in March and imposed a 25 percent duty on automobiles in early April.

The “reciprocal” tariffs that Trump announced in April are different from the 25 percent tariffs. The administration set a 10 percent baseline tariff on all imports into the U.S. and separate tariffs for each country. The baseline tariff took effect on April 5, but Trump set 90-day moratorium on the additional tariffs; the moratorium will expire on July 9. The tariffs on cars, steel, and aluminum are in a third category.

The rate of reciprocal tariffs on Japanese imports, the sum of the 10 percent baseline tariff and an additional 14 percent tariff, is 24 percent. The U.S. team told Akazawa that they would negotiate only the additional 14 percent tariff. In addition, the U.S. would not negotiate the 10 percent baseline with any country.

As soon as he returned to Japan, Akazawa reported to Prime Minister Shigeru Ishiba about the results of the meeting. Akazawa announced Japan’s position that tariffs on all goods should be negotiated. “We cannot reach an agreement without those items (cars, steel, and aluminum),” said Akazawa to the reporters. He added that he did not have parameters for an agreement with the U.S.

Notwithstanding the differences between the two governments, officials on both sides have continued to negotiate after Akazawa’s second visit. A third meeting at the ministerial level is anticipated in mid-May. Both sides understand the importance of reaching a deal before the 90-day moratorium expires.

The schedule is closely aligned with the domestic politics of each side. Ishiba does not want the negotiations to have a negative impact on elections to the Upper House in July. The leaders in Liberal Democratic Party (LDP) are worried about protests by farmers against any compromise on imports of agricultural products from the U.S. LDP leaders are aware of the importance of protecting the national interest in the tariff negotiations.

Opposition leaders are putting pressure on Ishiba not to make easy concessions. “It is important to keep a motivation for an early agreement, but Japan should not open its hand too early to be taken advantage of by the U.S.,” said the leader of the Constitutional Democratic Party of Japan, Yoshihiko Noda.

Concerns are growing about a slowdown in the Japanese economy. In a monetary policy meeting on the same day as the Akazawa-Bessent meeting, the Bank of Japan reduced its projection of Japan’s economic growth in FY2025 by more than 50 percent from the original 1.1 percent in January to 0.5 percent. Japan has no time to waste on tariff negotiations.

Trump has indicated that a deal with Japan is a priority that will set a level for negotiations with other countries. Along with progress in negotiations with Japan, Secretary of State Marco Rubio said that tariff talks with China would start soon. As approval ratings for President Trump are declining, Trump may believe that a negotiated deal with Japan will be a signal achievement in the MAGA agenda.

There is an expectation in Japan that the two sides may be able to make more progress when Trump and Ishiba are together at the G7 Summit in Canada on May 15 to 17. Ishiba spoke by telephone with Canadian Prime Minister Mark Carney, who had just been elected prime minister, to discuss the impact of Trump’s tariffs on the world economy and the multilateral trade framework. Although Ishiba’s G7 schedule does not yet include a side meeting with Trump, an agreement, even if it is only partial, between the leaders in June is the best hope for both Japan and the U.S.