Automotive Industry Imbalance Delays Trade Negotiations With Japan

Japan’s auto exports remain the biggest obstacle in reaching a trade deal with the U.S., according to opposition leaders briefed by Prime Minister Shigeru Ishiba.

Yoshihiko Noda, head of the Constitutional Democratic Party, said after a Thursday meeting with Ishiba that the U.S. focus on the automotive trade deficit is the primary roadblock, according to Bloomberg.

“He didn’t give a clear explanation, but it seems that the US has the strongest interest in the auto trade deficit,” Noda told reporters. “Various ideas were probably proposed, but there are differences in thinking regarding autos. So, he said a general consensus has yet to be reached.”

Despite two months of negotiations and a recent meeting between Ishiba and U.S. President Donald Trump at the G7 summit in Canada, no agreement has been made.

Japan’s trade surplus with the U.S. reached ¥8.6 trillion ($59.3 billion) last year—82% of which came from autos and auto parts—putting the country in Trump’s crosshairs as he pushes to rebalance trade using tariffs.

The U.S. has already imposed 25% duties on cars and related components, a serious concern for Japan, where the auto industry supports 5.6 million jobs and makes up about 10% of GDP.

Exports to the U.S. plunged 11% in May, with auto shipments down 25%. The monthly surplus still stood at ¥451.7 billion, with 93% tied to the auto sector, according to the Finance Ministry.

Bloomberg writes that Japan Innovation Party co-leader Seiji Maehara also confirmed that autos remain the main sticking point.

“He didn’t mention the details,” Maehara said. “But I felt that the biggest difference exists in automobiles. Japan is requesting a reduction in automobile tariffs, but I suspect that Trump may not have agreed to that.”

Ishiba assured party leaders that the government would support the auto industry through loans and broader cooperation. The talks are politically sensitive, coming just ahead of a key upper house election in July.

The uncertainty also hangs over a July 9 deadline, when U.S. reciprocal tariffs are set to revert to higher rates. Noda said it’s still unclear what the U.S. will decide.

If the hike goes through, Japan could see its across-the-board tariffs rise to 24% from 10%, on top of the existing 50% duties on steel and aluminum.

“We’re facing a situation that can be described as a national crisis,” Ishiba said. “To overcome it, we’ll take into account opposition party views and continue to strongly seek a review of the US tariff measures.”