President Donald Trump announced the U.S. and Japan have struck a preliminary trade deal on $7 billion worth of goods. The deal is expected to be formally signed in September, The Hill reported.
Trump said Japan will be buying U.S. corn. The deal also includes digital products.
“We have been working on a deal with Japan for a long time,” Trump told reporters at the Group of Seven summit in Biarritz, France, on Aug. 25, 2019. “It involves agriculture. It involves e-commerce. It involves many things. We’ve agreed in principle.”
U.S. Trade Representative Robert Lighthizer said the deal focuses on agriculture, industrial tariffs and digital trade. Japan will buy up $7 billion of U.S. agricultural products, mostly corn, under the agreement, Reuters said.
Japanese Prime Minister Shinzo Abe noted that most of the “potential” corn purchases would come through the private sector, Reuters reported.
“We’ve agreed to every point, and now we’re papering it and we’ll be signing it at a formal ceremony,” Trump added.
The report is good news for American farmers, who have seen their agricultural exports take a hit as the U.S. and China engage in a trade war. The U.S. is on pace to export $137 billion in products in 2019, which would be down from $143.3 billion in 2018, according to Statista data.
In 2017, China imported $23.8 billion worth of U.S. agricultural products – 17% of total U.S. exports. From 2000 through 2017, U.S. agricultural exports to China have increased over 700%, according to the Minnesota Department of Agriculture.
Through June, though, U.S. soybeans exports – the top ag export to China – were down by 12 million metric tons compared to last year after China announced a 25% tariff on them.
“All of the data that we have seen from both US and Chinese economists, is that throughout 2018, the tariffs actually had zero impact on China’s economy,” Erin Ennis, senior vice president of the US -China Business Council, said this summer at the Agriculture Transportation Coalition’s annual meeting. “China has yet to feel the pain of the tariffs that the United States has put in place.
“The hard facts are that as long as the tariff battle is in place and China has retaliatory tariffs against U.S. agriculture products, many exporters are going to be priced out of the market,” she added.
The U.S. exported approximately 17% of its 14.6 billion bushels of corn produced in the 2016-2017 crop year, according to the U.S. Grains Council. Twenty-one percent of that export went to Japan, making it the second largest export market behind Mexico (25%).
This year has seen a decline in corn exports of 9.4% year-to-date from 2018, although the amount of corn heading to Japan is up 16%.
“Given the existing volatility and uncertainty in global markets, today’s news that the administration is making progress in talks with Japan, one of our most important trading partners, is a welcome step in the right direction,” Myron Brilliant, executive vice president and head of international affairs, U.S. Chamber of Commerce, said in a statement. “However, the U.S. Chamber strongly urges the Trump Administration to continue its efforts to reach a comprehensive, high-standard agreement that addresses the full range of U.S. trade priorities from services and intellectual property protection to regulatory barriers. By securing that broader agreement, the administration will spur significant economic growth, create U.S. jobs, and open up other avenues for expanding our market access and commercial ties to the vital Asia-Pacific region.”
The U.S. and Japan began negotiating a trade deal in late 2018. The two countries totaled $297.5 billion in trade in 2018, according to the Office of the United States Trade Representative. The U.S. exported $75 billion worth of goods to Japan in 2018, up 10.9% from 2017. Japan imported $13 billion in agricultural products from the U.S. in 2018, led by corn ($2.8 billion); beef and beef products ($2.1 billion); pork and pork products ($1.6 billion); soybeans ($947 million); and wheat ($698 million).
According to Politico, the trade deal does not lift the 2.5% tariff on Japanese vehicles or major auto parts exported to the U.S.
“There are a series of industrial tariffs that are being reduced. Auto tariffs are not in that group,” Lighthizer told reporters at the G-7.
Details on the digital products and industrial tariffs have not been released yet.
